International Economics

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The Determinants and Dynamics of Aggregate Merchandise Imports in Ethiopia
(A.A.U, 2005-06) Leggesse, Dejene; Aredo, Dejene (Dr.)
Ethiopia imports goods and service s under serious foreign exchange constraint. Export ",earnings finance less than fifty percent of imports . For this reason there was excess demand for foreign exchange in the past four decades . The purpose of this study is therefore, to characterize the behavior of demand and determinants of imports in Ethiopia . The study used error correction and co integration as well as descriptive analysis. In the short run, one of the most important determinants of aggregate merchandise imports in Ethiopia is found to be foreign exchange availability in the form of international foreign exchange reserves. Economic activity (real GDP) , the relative prices (in this study the real exchange rate) have no significant influence in the short run. However, all together with international reserves have significant influence in the long run . The other important determinant of imports both in the short and long run is trade policy regime. Openness of the economy had given rise to magnified and accelerated growth in imports. One important implication drawn from the analysis is that the need for export promotion and diversification measures in order to fill the fast growing trade deficit.