Determinants of Export Performance in Ethiopia (Time Series Analysis)

Abstract

Although, export plays a vital role in an economy, there have been wide variations in countries export performance. The objective of this study was examining the determinants of export performance in Ethiopia using time series data running from 1981 to 2018 through employing Autoregressive Distributed Lag (ARDL) model. The stationarity properties of the data was detected using Augmented Dickey–Fuller (ADF) and the result indicates all the variables are stationary at level and first difference evidencing the effectiveness of ARDL model. The ARDL bound test used to test the existence of long-run link among the variables and the result confirmed that there is long run relationship between export and independent variables. The diagnostic test results also show that the model does not suffer from non-normality, heteroscedasticity, serial correlation and instability of parameters. The long-run coefficient result for our model evident that foreign direct investment and per capita GDP are positively associated with exports in Ethiopia while rate of inflation has negative and significant effect. In the short run dynamics, ECM model results reveals that FDI, per capita GDP and capital formation are significant and positively affect the export performance of Ethiopia in the short run. However, the rate of inflation still negatively and significantly affect the export in the short run. The Policies measures that geared towards improvement in real per capita GDP, attractive to FDI and economic stability would improve export performance. Keywords- Export, Co-integration, ARDL, Ethiopia DOI: 10.7176/EJBM/12-28-02 Publication date: October 31 st 2020