IMPACT OF AGRICULTURAL EXPORTS ON ECONOMIC GROWTH OF PERU: THE CASE OF AVOCADO AND GRAPES

Abstract

Agriculture sector in Peru contributes to 7.7% of Gross Domestic Product (GDP), accounts for 15% of the total export earnings and employs 25% of the labor force.Agriculture products such as grapes and avocadoes have seen notable export successes in the recent years compared to the country's traditional exports such as sugar and coffee.Despite, research on the relationship between agriculture exports and economic growth wasn't given serious attention until recently.This study seeks to analyze and quantify the impact of the selected agricultural products' exports on the Peruvian economic growth using an annual time series data from 1998 to 2016 obtained from Central Bank of Peru and International Trade Centre.Grape exports, avocado exports, agriculture growth rate, real exchange rate and price consumer index for each year of the stipulated period were used as determinant factors of the economic growth.Ordinary Least Square regression, Augmented Dickey Fuller test, the Phillip Perron test and the Granger Causality test were employed for data analysis.The findings revealed that while agriculture growth rate and the avocado exports have a positive impact on the real GDP, the grape exports and CPI have a negative impact.ADF and PP tests showed that, with the exception of the real exchange rate, all determinants achieved stationary at level I (0).Moreover, there was a unidirectional causality in the relation between the agriculture growth rate and the real GDP, and between grape and avocado exports and agriculture growth.The study recommends policy options including value addition, the incentive for private investment, and an improvement of the traditional agricultural production techniques for a proper diversification of Peruvian economy in the years following.

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