Abstract
This paper identified some of the main determinants of export in Ethiopia for the period 1977-2016 G. C. Also the paper tried to include new variable such like export diversification index and financial development as one determinant which are not considered in the most of the previous research conducted under this area, moreover the study used a bound test approach which is not used by previous research under this area. To test empirically the relationship between export performance and its major selected determinants such as: real gross domestic product, real effective exchange rate, financial development, export diversification index, terms of trade, total investment, trade openness and major trade partner GDP per capita i.e. China. The bound testing approach of co-integration and error correction model, within the Auto Regressive Distributive Lag Model frame work is developed. The estimated results show that all explanatory variables listed above significantly affect the export performance both in short run and long run except financial development and export diversification index. With sign of coefficients all determinates variable sign is consistent to economic theories. Finally the finding indicates that policy makers should give emphasis for the determinants factor of export. Also measures must be taken to reduce the constraints deterring the performance of the export sector through diversifying and promote exports by boosting domestic capital for exports, serving to transfer technology, new product for exports, making access to new and large foreign markets easily and improving technical and management skills and Lowering barriers to firm’s entry and reducing international trade cost.
Highlights
With respect to the destination of Ethiopia‘s exports, 38.75 percent of Ethiopia’s total merchandise export proceeds were derived from Asian markets. 58 percent of the Ethiopian exports went to European countries, about 23.87 percent of Ethiopia’s total export proceeds were to African countries and the America comprised 7.8 percent of the country’s total export
The principal sources are from Central Statistical Agency, National Bank of Ethiopia, Ministry of Finance and Economic Development, Ethiopian Revenue and Customs Authority and various publications of IMF & WB
Based on the availability of relevant data this study identify the main determinants of export in Ethiopia & employ an ARDL econometric model to estimate both the long run and short run effects of these variables on export of Ethiopia
Summary
Every society in the world strives to achieve economic development. Achieving this economic development requires economic growth, which depends on many determinant factors. Many African countries have been experiencing poor export performance The reason for such performance is the export portfolio of these countries, which depends on particular commodities [1]. Ethiopia relies on natural resources as the foundation of its economic development, food security and other basic necessities of its people. Smallholder agriculture is the dominant sector in Ethiopia and its share in total world exports is still very low. 58 percent of the Ethiopian exports went to European countries, about 23.87 percent of Ethiopia’s total export proceeds were to African countries and the America comprised 7.8 percent of the country’s total export. During the last five years beginning from 2011 up to 2016, the exports of Ethiopia have decreased at an annualized rate of -65.861 percent, from $2.88B in 2011 to $1.71B in 2016
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