Browsing by Author "Arega Yibeltal"

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    Statistical Analysis and Prediction of the Balance of Trade in Ethiopia Using Error Correction And Arima Models
    (Addis Abeba university, 2011-06) Arega Yibeltal; G/ Yohannes Emmanuel (PhD)
    For a long period of time, Ethiopia has involved in foreign trade and experienced trade deficit several time in the past. This deficit can be largely explained by the unequal terms of trade between agricultural commodities (the country's major exports) and capital goods (the country’s major imports). The core objective behind this study is to explore the long run as well as the short run correlates of balance of trade with reference to Ethiopia by using Johansen cointegration approach and Error correction model (ECM), and to forecast the balance of trade through ARIMA model by using annual data from 1974/75 to 2009/10. The Johansen multivariate co-integration procedure reveals that Ethiopia’s trade balance and key determinants (such as real gross domestic product, real effective exchange rate index, debt and foreign income) are co-integrated, and thus share a long-run equilibrium relationship. The error correction model indicates that real gross domestic product has short run impact on the balance of trade in Ethiopia but other determinants such as real effective exchange rate index, debt and foreign income do not have short run effect on the balance of trade in Ethiopia, and that about 77.8 percent of shock (disequilibria) will be adjusted within the same year. The value of balance of trade is forecasted by using ARIMA model. The result indicated that the deficit in the balance of trade is expected to rise from 2010/11 up to 2015/16. Key words: Trade balance, Johnsen coinstegration approach, Error correction model, ARIMA