Browsing by Author "Estiphanos, Girma(Dr.)"

Now showing 1 - 9 of 9
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    The Determinants of Export of Primary Commodities in Sub Saharan Africa: A Panel Co - Integration Approach
    (A.A.U, 2010-05) Melcaw, Beshir; Estiphanos, Girma(Dr.)
    SSA is generally characterized by a heavy dependence on export of primary commodities. Export income is the largest resource inflows in the region. However, the performance of the exports of primary commodities is devastating. And this is a source of shock to the economy due to the volatility & continuous decline of the prices of their exports. Both internal and external factors are responsible for the poor performance of the sector. The study employed panel data to empirically analyze these determinants in SSA for the period 1990-2008 using a panel co- integration approach. A sample of 25, 15, 19 and 15 countries from the region were taken to analyze the determinants of exports of food, agricultural raw material s, minerals and energy (as defined under the SITC) respectively. For the first three commodity groups the real value of exports is specified in a semi-log linear form as a function of the relative export price (unit export price of a commodity per its world price), the international value of a commodity relative to its domestic value, the weighted average income of importers, real effective exchange rates, world interest rate, gross domestic investment and foreign direct investment. On the other hand, the real value of export of energy is specified in a log linear form as a function of world export price of energy relative to world prices and gross world income (with the assumption of constant supplies). The long run relationships were estimated using OOLS which accounts for serial correlations and problem of endogeneity. The results demonstrated the inastic nature of the elastic ties of exports of the three commodity groups while elastic price (relative) and income elastic ties were found for energy exports. Moreover, the supply side factors and the macroeconomic policies pursued by importers are found to be among the important determinants of exports of primary commodities in SSA.
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    The Effect of Exchange Rate Changes on Trade Balance of Ethiopia: 1970/71 - 2005/06."
    (A.A.U, 2007-03) Amsalu, Eshete; Estiphanos, Girma(Dr.)
    The purpose of this paper is to analyze the effects of change in exchange rate of Birr on the trade balance of Ethiopia. The study employs the standard Augmented Dickey-Fuller test in order to test the stationarity of all variables at levels and first differences and the Johansen and juselius' approach to estimation of multivariate co integration systems on the quarterly data in the period 1970/ 71QI - 2005/06QI. In order to establish the existence or absence of a j-curve phenomenon in Ethiopia, we employ impulse response function to trace the effect of real effective exchange rate on the trade balance of Ethiopia. The main findings of the study show that: first, there is a negative relationship between the trade balance and the real effective exchange rate appreciation indicating that a real depreciation will improve the trade balance in the long run; second, the results indicate that there seem to be no clear evidence of the J-curve phenomenon. The policy implication of the finding is that to improve its international competitiveness and its trade balance deficit, Ethiopia can use depreciation/devaluation based adjustment policy. Competitiveness, however, goes beyond currency depreciation. I.e. currency depreciation alone is unlikely to be able to increase competitiveness. Therefore, Ethiopia has to use also export diversification strategy i.e. the government has to pursue to diversify export commodities from agriculture to other products both vertically and horizontally in order to be competitive and reduce its trade deficit since most of export items relied on few primary commodities. The negative sign of domestic real income indicated that a rise in domestic income of Ethiopia encourages its consumers to demand more foreign goods, leading to a deterioration of trade balance in favor of its major trading partners. In this regard, the government has to promote import substitution strategy In order to shift the demand of domestic consumers towards domestic goods.
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    Evaluation of the Impact of Trade Preferences on Ethiopian Export: An Augmented Gravity Modeling Approach.
    (A.A.U, 2008-06) Tesfaye, Daniel; Estiphanos, Girma(Dr.)
    To integrate least developed countries including Ethiopia in to international trade market, African Growth Opportunity (AGOA) and Everything But Arm (EBA) initiatives have been designed by U.S. and European countries respectively. The purpose of these initiatives is to enhance and diversify the export of the beneficiary countries. Therefore the purpose of this study is to analyze the effects of these programs on Ethiopian export. The study employs the fixed effect gravity model using panel data for the period 1974/75 - 2005/ 06 of annual data . The main findings of the study show that AGOA has negative contribution to Ethiopian Export. This might be explained from both beneficiary (i.e. Ethiopia) and granting country's limitation. Poor infrastructure, lack of skilled manpower , poor public services, etc of Ethiopia is some of the limitation to exploit the scheme. Whereas un stability of the program, rules of origin, non tariff harries are some of the factors that hinders the exploitation of the scheme. The result of the study also indicates that the European Union initiative has no significant effect on Ethiopian export. Like U.S. initiative this program has also its own limitations, but still Ethiopia has to identify the drawbacks in exploiting the program. The policy implication of the finding is that to exploit the program Ethiopia has to solve the drawbacks for her poor export performance. Especially she has to use export diversification strategy, i.e. the government has to peruse to diversify exportable commodities from agriculture to other products both vertically and horizontally in order to be competitive . Since most of export items relied on few primary products. In addition to this the government has to give due attention to improve social capital, skilled manpower, public services infrastructure etc.
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    The Impact of Trade Liberalization on the Trade Balance and Economic Growth: The Case of Ethiopia
    (A.A.U, 2005-07) Bizuayehu, Anteneh; Estiphanos, Girma(Dr.)
    The objective of the study is to asses the impact of trade liberalization on the trade balance and economic growth. The study employs an Error Correction Mechanism (ECM) to investigate relationship between trade balances and trade liberalization variables using annual data over the period 1970- 2002. Moreover, a balance of payment constrained growth model is used to assess the effect of trade liberalization on economic growth of Ethiopia. The empirical result of the descriptive and time series analysis suggests that trade liberalization has not reduced the trade balance as theoretically expected. However, the process has aggravated the trade deficit at least in the short run. The major explanation for this dismal trade balance is attributed to the imbalance between the country's exports of primary commodities and its imports that are mainly composed of capital and consumer goods. Trade liberalization efforts have aggravated the existing imbalance by inducing more imports than exports. Moreover, the terms of trade variable is found to have profound effect on trade balance. The analysis conducted with respect to the impact of trade liberalization on economic growth using Balance of Payment Constrained Growth model demonstrates that the income elasticity for import demand increased to 2.05 after liberalization as compared to 0.75 during the pre liberalization ion period. Moreover, the study finds out that the actual growth rate has been constrained by the Balance of Payment position after trade liberalization. As a whole, Trade liberalization per se did not improve the trade balance and economic growth, which can be partly attributed to the structure of exports and imports. Hence, the ma in policy implication of the study is that the country should improve the structure of production and income elasticites of demand for exports, which involves the diversification of the existing primary commodity exports into manufactured goods.
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    Institutional Quality Differences Explaining Growth Differences between Sub-Saharan Africa and East Asia.
    (A.A.U, 2009-01) Amauel, Eba; Estiphanos, Girma(Dr.)
    The economic performance of most of the Sub-Saharan countries is not satisfactory as compared to that of East Asian countries. The issue of economic growth has been the concern of economists with the intent of answering the question as to why there are differences in the growth rates across countries. The impact of quality of institutions on economic performance is the subject of much debate among economists recently. Many researches that have analyzed the factors causing difference in the rates of economic growth have found factors such as quality of institutions, geographical location, integration in international trade and culture among other things to explain the observed differences in per-capita income. While some studies like Sachs and Warner assign the prominent role to Geography, others concentrate on different factors such as institutions and integrations for causing the difference in economic performance among regions and countries. This paper develops a case that differences in the quality of institutions is one of the fundamental cause of differences in growth between SSA countries and some East Asian countries. The Arellano-Bond (1991) and Arellano-Bover (1995) linear generalized method of moments (GMM) is used to estimate the neoclassical growth model Solow Augmented with institution to asses the impact of institutional quality difference on growth difference. The result of this study suggest that gross capital formation, population growth, geography and the quality of institutions are the major factors causing differences in growth rates. Mainly the study concludes that improvement in the quality of institution by the same amount in the two regions under consideration has a higher impact on growth for SSA countries than the East Asian countries considered. Thus the SSA countries should also concentrate on building social infrastructure which is equivalent to improving institutional quality to encourage productive behavior for registering higher economic growth.
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    Liberalization Globalization and Economic Growth in Sub-Saharan Africa
    (A.A.U, 2005-06) Kassahun, Addis; Estiphanos, Girma(Dr.)
    In this study attempts has been made to examme the relationships and impact of the key liberalizations and/or globalization variables in economic growth in Sub-Saharan Africa (SSA). Using panel data, this paper essentially explores the effects of openness to international trade and foreign direct investment (FOI) on economic growth. Given the data and objectives of this study, we used Fixed Effect after testing for long-run relationship using panel co-integration test on variables under consideration. In the due process, there are two analyses were undertaken. First, the time series properties of the variables were ascertained by using the Hadri Panel data unit root test procedure. The results indicate that some of the key variables are J(l). Then, the results from Larson and Johansen panel co-integrating procedw-es indicates that there is no need to use Error Correction Mechanism (ECM) rather it is appropriate to use the OLS estimation techniques of Fixed-Effect or Random-Effect Model. The specification test which we used, Hauseman test, favored the Fixed-Effect Model based on our data Almost all the estimation results showed that openness to Foreign Direct Investments (FOI) has positive and significant impact while openness to international trade is insignificant and often negatively affect growth of low-income countries of Sub-Saharan African. The results indicate that openness benefits the high-income group than the low-income group in SSA. Therefore, policy measw-es, which aIm to bring economic growth through liberalization and integration, need to go beyond openness to international trade. It is worth for SSA countries individually and collectively to creating an enabling environment for investment, enhances the volume of trade at the regional and international levels to increase their level of income. They need to take measures in the areas of improving their human capital development (education or adult literacy etc), industrial value creation and financial deepening.
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    The potential cost and benefits of WTO membership for Ethiopia: A CGE model Approach
    (A.A.U, 2008-06) Seifu, Ashebir; Estiphanos, Girma(Dr.)
    This paper presents a structuralist CGE mode l for Ethiopia 's to assess the potential costs and benelit s of WTO membership . The analyses is made based on Ethiopian social accounting matrix (SAM) of 200112002 constructed b y World Bank. The model is simulated for alternative policies scenarios (import tariff reduction) depicting full and in discriminating liberalization. Gradual and rationalized liberalization and instantaneous tariff liberalization. The simulation experiment suggest that the impact of trade liberalization ha s mixed effect on the Ethiopian economy . Import tariff reduction is likely to increase domestic production and expo rt of commodities particularly produced in agriculture and service sector. It also increase gross domestic product of the country but it is not large as stated by man y financial institutes Such as World bank. IMF and WTO . On the other hand . tariff reduction has negative effect on government revenue investment and on terms or trade. The result shows there is reduction in investment which is opposite to the expectation. There is a cap it al flight form the country and it is al so disincentive for investors. The Government \Revenue reduction in the short run is high. In addition to this the industrial sector shows reduction in production because of more competition from abroad (due to protection reduced in this sector An import ant policy implication o f this analysis is that the successes of trade liberalization critically depend on strategic the government should set and improvements in the institution of the country.
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    Trade Liberalization and Economics Growth in Ethiopian :A Bound Test Approach
    (A.A.U, 2008-06) Assefa, Addis; Estiphanos, Girma(Dr.)
    The purpose of the study is to analyze the relationship between Ethiopia's economic growth (RGDP) and trade liberalization (OPEN), using the time series data during 1971/72-2003/04. In the estimation of the long run and the short run relationships among the variable s, the newly developed ARDL-ECM bound test procedure (pasaran, 2001) is employed. This approach is capable of testing for the existence of a long run relationship regardless of whether the underlying time series are individually 1(0) or 1(1) or whether the underlying time series are mutually 1(1) or 1(0). This enhanced the stability and robustness of our results. Accordingly, the results indicate that there exist a long run relationship between real GDP per capita and openness (trade/GDP). The long run estimated coefficient suggests that the impact of trade liberalization on economic growth has positive and significant but others variables real exchange rates (RER) and lab our force (LF) are in significant impact on real GDP per capita. The short run error correction model also confirm that the existence of the co-integration relationship between economic growth and trade openness. Further, the feedback coefficient indicate that a very high rate of adjustment towards long run equilibrium. The CUSUM and CUSUMQ stability test also indicate that the estimated long run Coefficient remain stable over the period of the study. Since trade liberalization is the long run process, from the study we suggest that in order to enhance growth the country should continue to liberalize their trade.
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    Trade Liberalization and the Balance of Payment: Empirical Evidence from Ethiopia
    (A.A.U, 2005-06) Chala, Bayisa; Estiphanos, Girma(Dr.)
    The effect of trade liberalization on the trade balance and current account of the balance of payments is controversial irrespective of the framework used for the analysis of balance of payments. In the partial equilibrium farm work of the elasticity approach, the effect will depend on the extent to which export and import duties change and the price elasticity of exports and imports. In the general equilibrium framework of the absorption approach to the balance of payments, the effect of liberalization 'will depend on how real income is affect relative to real consumption expenditures. In the monetary approach to balance of payments, the liberalization could affect both demand and supply of real money balances. The aim of this paper is to examine the empirical analysis of the balance of payments consequences of trade liberalization of Ethiopia. It focuses on the impact of trade liberalization on the trade and current account balances of the balance of payments. The main question addressed is whether there has been an improvement or deterioration in these accounts following trade reform. The data analyzed by estimating the time series econometric models using OLS and ECM frame works to test the impacts of trade liberalization on trade balance and the current account of the balance of payments in the short-run and the long-run. It uses a regression model formulation, which includes domestic and world real income; real effective exchange rate and money so that the monetary, elasticity and absorption approaches to the balance of payments are also examined. The main findings are that trade liberalization has worsened the balance of trade and the current account balance deficit, because imports have increased more rapidly than exports. The results show also that real effective exchange rate does playa role in determining the long-run equilibrium behavior of the Ethiopian trade and the current account balance. The coefficient of domestic money supply variable is negative and statistically significant. This implies that domestic money supply has an effect on trade and current account balance