International Economics

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Determinants of Ethiopia's Bilateral and Potential Exports in the Emerging Countries: A Gravity Model Approach
(A.A.U, 2012-06) Ayalew, Zeleke; Guta, Fantu (Dr)
Exports are the drivers of economic growth in Ethiopia. Given their importance in the economy, it is necessary to analyze factors that are determining export flows between Ethiopia and its trading partners. A gravity model is very important in the analysis of bilateral trade flows, and has proven to be a useful 1001 in determining trade or export potential of a country. The purpose oj this study is to investigate factors that determine exports of Ethiopia using a gravity model approach. The analysis indicates that increases in importer's GDP and Ethiopian's GDP cause exports to increase, while distance is associated with a decrease in exports. Real exchange rates do not have an impact on export. Ethiopia doesn't export more to countries where it shares a common border. The study shows that there is unexploited export potential to among others, China, India and Brazil. These results are important for trade policy formulation in order ensure that Ethiopia's export potential is exploited in order to enhance economic growth.