International Economics

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The Potential of Ethiopia's Spice Trade and Its Impact on Economic Growth
(A.A.U, 2025-08-10) Abigiya Sem; Habtamu Adane (PhD)
This thesis investigates the economic potential of Ethiopia’s spice trade and its impact on national growth. Despite favorable agro-ecological conditions and the ability to produce over 50 spice varieties, Ethiopia’s spice sector remains underutilized. Using a combination of descriptive analysis, gravity modeling, and time-series econometric techniques (DOLS and VECM), the study evaluates trade performance, export gaps, and the macroeconomic effects of spice exports from 2000 to 2024. The gravity model identifies India, Egypt, UAE, and Pakistan as Ethiopia’s main spice export destinations, while revealing significant underperformance in markets like Kenya and Saudi Arabia. Traditional predictors such as GDP per capita and geographic proximity showed limited influence, suggesting the need for strategic market targeting and improved trade facilitation. Export gap analysis highlights missed opportunities, emphasizing the importance of logistics, certification, and bilateral agreements. Econometric findings confirm that spice exports and export diversification positively influence Ethiopia’s GDP in the long run, though short-term effects are volatile due to structural constraints. The VECM results show a stable long-run equilibrium among GDP, spice exports, and diversification, with GDP adjusting significantly to deviations.