Determinants Of Export Growth In Ethiopia Uni Muenchen De-Books Pdf

Determinants of Export Growth in Ethiopia uni muenchen de
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Sisay Menji1, Comments on this work can be given via shewalem gmail com. Addis Ababa Ethiopia, List of Figures II, Acknowledgment III. Acronyms IV, Abstract 0, 1 Introduction 1, 1 1 Background 1. 1 2 Statement of the Problem 2, 1 3 Objectives 2, 1 4 Scope of the Study 3. 1 5 Significance of the Study 3, 1 6 Limitations of the Study 3.
1 7 Organization 3, 2 Literature Review 5, 3 Data Trends 14. 3 1 Export Trend during 1981 2008 14, 3 2 Structure of Ethiopian Export in Terms of Volume 15. 4 Econometric Model and Estimation 19, 4 1 Econometric Model 19. 4 2 Estimation 21, 4 2 1 Determinants of Merchandise Export Performance 22. 4 2 2 Determinants of Manufacturing Exports 23, 4 3 Empirical Analysis of Findings 23.
5 Conclusions and Recommendations 27, 5 1 Conclusions 27. 5 2 Recommendations 29, 6 Annexes 30, 7 References 32. List of Figures, Figure 1 Trends in Exports during 1981 2008 14. Figure 2 Export Growth Rates 15, Figure 3 Export Structure of Ethiopia in metric tons drawn using data from MOFED 15. Figure 4 Export Values Average Trend 16, Figure 5 Share of Major Export Items in Export Revenue drawn using MOFED data 16.
Figure 6 Share of Manufacturing Exports in Merchandise Exports 17. II P a g e, Acknowledgment, First of all I thank GOD to let me finish this work My next. thanks go to Riaan Meyers who have shared me his thoughts on. this work and commented on my work My special thanks go. to Dr Deepak who commented on this work despite his busy. schedule I really appreciate the staff of EEA EEPRI for their. unreserved help in providing data I would also like to thank all. who helped me in the work, III P a g e, EEA EEPRI Ethiopian Economics Association Ethiopian Economic Policy. Research Institute, FDI Foreign Direct Investment Net Inflows. GDI Gross Domestic Investment, GDP Gross Domestic Product. HDI Human Development Index, HDR Human Development Report.
IMF International Monetary Fund, REER Real Effective Exchange Rate. TOT Terms of Trade, WAMZ West African Monetary Zone. WB World Bank International Bank for Reconstruction and Development. WDI World Development Indicators, GNI Gross National Income. IV P a g e, In this study analysis of factors affecting export supply of Ethiopia. during the period 1981 2004 have been made using co integration. analysis Data trend reveals that Ethiopian export performance was. highly volatile during the period on average merchandise exports have. been growing at 7 per annum while manufacturing exports were. growing at 4 per annum The trend also reveals that Ethiopia s export. sector is mainly dominated by few primary commodities where. manufacturing exports account for less than 15 of merchandise. exports on average, The two models estimated depict that merchandise export volumes are.
significantly influenced by gross capital formation proxy for production. capacity and share of trade in GDP proxy for trade liberalization while. other variables terms of trade real effective exchange rate foreign. income and foreign direct investment were found to be insignificant. Manufacturing exports equation reveals an interesting result. manufacturing exports supply was found to be negatively significantly. affected by foreign income Similar to merchandise export results. manufacturing exports were also found to be positively affected by. gross capital formation Terms of trade real effective exchange rate. share of trade in GDP and foreign direct investment were found to be. insignificant The study concludes with recommendations to increase. share of manufactured exports and diversify export base of the country. 1 Introduction, 1 1 Background, Ethiopia has been showing a remarkable growth during the recent years. starting from 2004 where annual GDP growth rate was above 10 and. where also the country was among the best performers in GDP growth 2. According to WDI 2008 country profile Ethiopia has a population of 77. million with annual growth rate of 2 6 in 2006 In the same year national. poverty rate was 44 Gross National Income was 12 9 billion US where as. GNI per capita was 44 US The country has a life expectancy at birth of 52. years HDR 2009 report gives the country a rank of 171 with an HDI of. Ethiopian economy is highly dependent on agriculture though its share is. declining now In 2006 value added in agriculture accounts for 47 of GDP. while industry and services account for 13 and 39 respectively The. country is gradually liberalizing its economy Share of merchandise trade in. GDP increases from 11 4 in 1990 to 42 1 in 2006 Exports account for. 16 of GDP while imports account for 42 4, Ethiopia has been exporting mainly traditional exports Merchandise exports. have been growing at an average rate of 7 during 1981 2008 while. manufacturing exports were growing at an average rate of 4 Real. merchandise exports were 1 16 billion USD in 2008 while manufacturing. real exports were 92 3 million USD 8 of merchandise exports. Merchandise export revenue was highly dependent on non manufacturing. exports where the average share of manufacturing exports during 1981. 2008 was around 14 4 Own computation using data from WDI. GDP growth was 13 6 in 2004 11 8 in 2005 11 3 in 2006 11 1 in 2007 11 3 in 2008 source is WDI 2009. Human Development Report 2009, 1 2 Statement of the Problem5. Though Ethiopian real merchandise exports have been growing at an. average rate of 7 during the study period Ethiopian export sector is still. small6 passing 1 billion US only after 2005 where merchandise exports. reached only 1 1 billion dollar in 2008 Despite high growth rate of exports. the country s trade deficit has been increasing by an average rate of 7 and. reached a value of 1 9 billion dollars in 2004 Ethiopian export is still highly. dependent on non manufacturing exports Manufacturing exports share. declined from that of 20 5 in 1981 to 8 in 2008 Export revenue. according to MOFED data were highly dependent on few commodities where. Coffee Chat Oil Seeds Hide Skin and Flower accounted for 78 in average. High dependence of exports on primary exports has many drawbacks for the. country First traditional exports have been dominated by declining terms of. trade which made export earnings not to increase well enough despite. increased export volumes despite the recent spikes in value of traditional. exports This can be revealed from the fact that unit value of exports was. 116 in 1981 while it declined to 81 in 2004 showing nearly a 30 decline in. 24 years Secondly exports of traditional exports do not have much linkage. effects in the economy because mostly they are sent raw. 1 3 Objectives, This paper mainly addresses two purposes First the paper will try to reveal. the performance trend of merchandise manufacturing exports during. 1981 2008 Second the paper will analyze the determinants of export. performance real merchandise manufacturing exports during the period. Numbers used are taken from WDI 2009, Looking at 2006 data current merchandise exports were 3 4 billion US for Kenya 5 6 billion for Sudan Oil and.
1 6 billion for Tanzania while 1 01 billion for Ethiopia. 1 4 Scope of the Study, The study analyzes determinants of export performance real export values. during the period 1981 2008 Leaving aside the short run dynamics the. study will try to analyze what has determined export supply during 1981. 2004 Data trend work is mostly done for 1981 2008 but regression. analysis is done for 1981 2004 because real effective exchange rate was. not available after 2004 The period has been chosen due to lack of data for. Ethiopia before 1981, 1 5 Significance of the Study. Lower export revenues not only mean lower income to exporters their. employees but it also means lower capacity to import By revealing export. determinants and export trends the paper will try to reveal the influential. factors in Ethiopian exports a The paper will also broaden the understanding. on the subject matter and hence will initiate further dialogues research on. the sector, 1 6 Limitations of the Study, The study faces the following limitations First due to lack of market access. data for the study period it was available starting from 1996 the impact of. market access on Ethiopian exports were not included in the study Second. the impact of tariffs on exports was also not analyzed due to lack of data for. the whole sample period But tariffs were found to have the expected. impact a significant negative coefficient when the regression is made for 10. years for which tariff data was available, 1 7 Organization. The study is divided into five main sections Following the introduction. chapter II will make review of literature In chapter III data trends will be. revealed In chapter 4 the research methodology will be revealed and. analysis of empirical findings will be made In the last section conclusions. and recommendations will be made, 2 Literature Review.
Sonia Munoz 2006 on her his study made on the impact of parallel market. and governance factors on Zimbabwe s export performance used data from. 1984 Q1 2004 Q4 The study used merchandize export data figures to. Zimbabwe s 10 most trading partners The researcher used the Imperfect. Substitutes Model proposed by Goldstein Khan 1985 to analyze the data. The model used real exports of Zimbabwe to country i as an explanatory. variable while it employs real parallel exchange rates Industrial. production index of country i as a proxy for foreign income and other. qualitative variables to account for corruption bureaucracy quality. democratic accountability economic risk internal conflict ethnic tensions. law and order and investment profile, The researcher estimated the export demand equation using a panel data. model with random effects According to the results elasticity of official. exports with respect to official exchange rates were found to be 0 11 while. with respect to parallel exchange rates it was found to be 0 26 Both. elasticity coefficients were significant Foreign income was found to be. insignificant in affecting export demand Among the qualitative variables. incorporated ethnic tension was found to affect export performance. significantly, Aggrawal 2001 in his study of the impact of multinational enterprises on. India s export performance used panel data from 1996 2000 over 916. firms classified into 30 industries The study tested two hypotheses 1 do. MNE affiliates perform better than their local counterparts in the export. market in a liberalized market 2 MNE affiliates have greater comparative. advantage in high tech than in low medium tech industries. The results from the first regression designed to show the determinants of. inter firm variations in export performance showed that MNE affiliates. perform better than their local counterparts hence validating the first. hypothesis The results also suggest that firm size import of raw materials. capital goods and R D to have positive significant impact on export. performance while workers skill purchase of technology were found to. have a negative insignificant impact, The results from the second regression intended to analyze Industry group. wise determinants of export performance rejects the second hypothesis. made in the study The variables showing MNE impact i e Foreign Equity. share emerged insignificant for the high tech industry group but being. weakly significant for medium tech industries In low tech industries the. impact of Foreign Equity was found to be positive significant Similar to. the first results in the Industry group wise analysis import of capital goods. raw materials turned significant to all firms though the latter turned. insignificant in low tech industries, R D variable were found to be positive significant in medium high tech. industries but insignificant in others Though skill was found to be. insignificant in the sample for all firms it was found to have a positive. significant impact for firms in the high tech industry group Agraawal 2001. concludes the results by stating the following, It was found that the export performance of firms was linked strongly.
with firm size and imports of raw materials and components in almost. all technology groups, On a study done on analyzing the impacts of trade liberalization on Sub. Saharan African export performance Babatunde 2009 used panel data set. from 1980 2005 The results from the model are given in the next table. Variable Fixed Effects Regression Random Effects Regression. Country productive capacity Positive but insignificant Positive but insignificant. REER overvaluation Positive significant Positive significant. Real Effective Exchange Negative insignificant Negative significant. Tariff Negative insignificant Negative insignificant. Import of raw materials Positive statistically Positive statistically. Babatunde 2009 summarized the results as follows, The panel evidence supports the view that the real effective. exchange rate is an important factor affecting export. performance in SSA Trade liberalization can be said to affect. export performance indirectly through the increased access to. imported raw materials, In a study designed to analyze the impact of independent exchange rate. policies of the WAMZ West African Monetary Zone participating countries. Lower export revenues not only mean lower income to exporters amp their employees but it also means lower capacity to import By revealing export determinants and export trends the paper will try to reveal the influential factors in Ethiopian exports a The paper will also broaden the understanding

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