Determinants of Agricultural Export Trade: A Co-Integration Analysis for Cotton Lint Exports from Chad

Abstract

Following the dramatic decline in Chad's performance for production and export of cotton lint (from leading producer and among leading exporters in the 1960s to being at the bottom in rank among the C-4 countries of WCA since 1998), use is made of the Johansen Full Information Maximum Likelihood test to identify and estimate the magnitude and effects of key determinants of exports from the country. In this regard, I defined and estimated two primary cointegrating and error correction equations using volume and value of exports as dependent variables in the respective equations. Diagnostic tests performed revealed that the estimates observed are stable, and residuals for the respective models are normally distributed, nonserially correlated and homoscedastic. Results of the study show that cotton production, competitiveness of the country in exports of the commodity, volume of world exports of the commodity, and export price faced by the country are key determinants of export growth. Policies implemented in both the internal and external environments are noted to have had more harmful than beneficial implications for the cotton industry.