Economics

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Browsing Economics by Author "Abadi Taddesse"

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    The Behaviours and Dynamics of the Real Exchange Rates of the "Birr" (1960-1991)
    (A.A.U, 1996-06) Berhanu Andualem; Abadi Taddesse
    Based on ERHS data, the study used two-step dynamic nonlinear panel data model to analyze poverty dynamics, the implication of shocks and informal risk sharing strategies on poverty dynamics. The model better explains the dynamic process of rural poverty in Ethiopia, which reveals the existence of true state dependence. Size of land owned, number of oxen, male headship and higher educational attainments reduces the risk of poverty. Only drought s’= Ock and death experienced betweenI977-1983 E.C. have long-term impact on poverty dynamics, whereas the impact of idiosyncratic shocks is wiped-out shortly. Many of informal risk sharing strategies significantly reduce current poverty. But in the long-tem receiving remittance and food gift prolongs poverty. While lending to others and membership in Eqqub have poverty reducing impact both currently and in the long-tem.
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    The Dynamics of Inflationary Process in Ethiopia
    (A.A.U, 1997-06) Belete Zewdu; Abadi Taddesse
    This paper made an attempt to explain, among other things, the dynamics of inflationary process and, hence, give insights as to how to manage the inflationary process in the country. To investigate this issue we employ both statistical as well as econometric methods. To look at the specific determinants of inflation we model the country's inflation process from the monetarist as well as the structuralist view. Moreover, to capture the relative sectoral differences in response to changes in some of the important macroeconomic variables, we classify the economy into the agricultural and non agricultural sectors and model the respective sectors accordingly. Based on this procedures we found out that inflation in the country is generally a supply rather than a demand side phenomenon. In addition to this, we notice that the monetarist argument that inflation has a one- to c one correspondence to changes in broad money supply does not hold in our case. What we notice is that even under steady state equilibrium situation, the impact of broad money supply on the inflationary process in the country is very minimal. We proceed and apply the structuralist model and found out that the lion's share of the variation in the inflationary process in the country is explained by this model. Here, we found out that, on top of the monetarist variables, especially income, the variation in inflation is influenced by structural as well as institutional factors. Specifically,we observe that the long run inflationary process is found to be determined by real income, import prices and government deficit level. In the short run, on the other hand, in addition to the above variations in broad money supply and rain fall play an important role in the inflationary process of the country. in line with the structuralists' argument we also found out that there are, indeed, sectoral differences in response to changes in some of the macro economic variables.
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    The Effect of Devaluation on Major Macro Variables (The Ethiopian Case)
    (A.A.U, 1996-06) W/Michael Sentayehu; Abadi Taddesse
    A Time series econometrics technique especially error correction Method employed for analyzing the efficiency of devaluation on Ethiopian economy. Secondar y data was collected for the period 1964-1965 from different publication and government office . Edward's real exchange, current account and output model adopted for the study; moreover, Elbadawi' s real exchange and price model was applied for the study. The result confirmed that devaluation could not lead to stagflation circumstance. It was rather expansionary (increasing output and employment) and inflationary. The result of this study adheres the view of that when initial condition of the economy at real exchange appreciation, nominal devaluation could accelerate the process of convergence towards its equilibrium. Devaluation improved the current account balance because of the increment of aid to the country after devaluation; however, it did not improve the trade balance due to the fact that the premium declined considerable degree but not abolished.
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    The Parallel Exchange Rate and the Premium in Ethiopia
    (A.A.U, 1996-06) Degefa Derrese; Abadi Taddesse
    In response to excess demand for foreign exchange in the official market, parallel markets for foreign exchange develop . The emergence and existence of active parallel foreign exchange market creates several complications to policy makers in their attempt to regulate the external balance. That is, variation in the parallel exchange rate and the premium affect the level of international reserves. Ethiopia had high parallel premium for foreign exchange for 1973-1993 period and moderate premium in 1972, 1994 and 1995. As to what determines the movement in the behavior of the parallel exchange rate and the premium in Ethiopia is the objective of this study to investigate. Accordingly, stock-flow model is adopted to find out the determinants of the variation in the parallel premium while simultaneous equation smuggling model is used to investigate the determinants of the parallel exchange rate in Ethiopia. By employing the above models, the study came out with the result that real official exchange rate, real money balance, import tariff rate, real output and one year lagged level of the premium are the determinants of the variation in the spread between the parallel and the official exchange rates in the long-run while its short-run determinants are found to be real official exchange rate, import tariff rate, and one period lagged level of the premium. On the other hand, the movement in the parallel exchange rate is found to be determined by desired imports, trade restrictions and enforcement of exchange control, and trade and exchange rate policy reforms. Hence, policy makers should take into account the found eterminants of the parallel exchange rate and the premium so as to formulate sound exchange rate policy, i. e., in order to reduce the parallel premium to insignificant level or to unify the official and the parallel exchange rates of Ethiopia.