Browsing by Author "Ferede Tadele"

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    Analysis of Tax Revenue Forecasting In Ethiopia: An Auto-regressive Distributed Lag Approach
    (Addis Ababa University, 2013-09) Abate Demeke; Ferede Tadele
    This study focuses on the investigation of the causal long‐term relationship between tax revenue and nominal gross domestic product in Ethiopia. In this research the analysis of short term relationship also under taken. Using an error correction model (ECM) model with annual data over the last 32 years from 1980/81 to 2012/13, the study found a close relationship between tax revenue and nominal gross domestic product. The size of the long‐term parameters looks acceptable. The estimation technique employed in this research was auto regressive distributed lag integration approach with one period lag length and the result shows GDP and tax revenue own two period lags affects the tax revenue. These variables have also short term causal relationships and their granger causality is statistically significant.
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    Assessing the Impact of Income Inequality on Economic Growth: Evidence from Ethiopia
    (A.A.U, 2021-09) Sisay Andualem; Ferede Tadele
    Identifying the impact of income inequality on economic growth has paramount importance for shared and broad-based economic growth. Thus this study was conducted to examine the effect of income inequality on economic growth evidence from Ethiopia. To achieve this objective time series data from 1982 to 2019 was used and it is examined by using ARDL estimation technique. Economic growth was used as dependent variable and income inequality, population growth, urbanization, inflation and financial development were used as independent variables. The estimation result revealed that in the long run urbanization, financial development, population growth and income inequality have positive significant effect. While in the short run urbanization and financial development have negative significant effect, but population growth and income inequality have positive significant effect. The coefficient of the ECM is negative 0.913 and this signifies that a deviation from the long-run equilibrium subsequent to a short-run shock is corrected by about 91.3 percent at the end of each year. Based on the findings the study recommends that the government and other concerning body the government has to implement pro-poor strategy to include all section of the economy from the benefits of growth, improving the performance of secondary market
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    Can the Monetary Authority Control the Stock of Money Supply in Ethiopia an Empirical Investigation
    (Addis Ababa University, 2014-06) Desalegn Gashaw; Ferede Tadele
    The aim of this paper is to investigate empirically the ability of Nation Bank of Ethiopia to control the stock of money supply. This investigation seems to conform to the ongoing controversy surrounding the exogeneity /endogeneity hypothesis regarding the money supply i.e. the controllability/non-controllability of the money supply by the Central Bank. The paper has first tested the money multiplier model which says money is exogenous and thus controllable by central banks. We examine the constancy and Stationarity of the money multiplier and the results suggest that the money multiplier remains non stationary for the entire sample period. We then tested cointegration between money supply and monetary base and find the evidence of cointegration between two variables. The coefficient restrictions are satisfied only partially. The result from this model shows it will be difficult to use the money multiplier model as a frame work for monetary policy. The paper attempted to test the post-Keynesian hypothesis of endogenous money for Ethiopia using Granger Causality test. We have found that at all level of lag lengths credit causes broad money but at higher lag length broad money do not cause credit in the sample period. Though the result seems gloomy the endogeneity of money supply is strong.
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    Determinants of Export Performance and Employment of Labor in Large and Medium Scale Manufacturing Industry of Ethiopia an ARDL Cointegration Approach
    (Addis Ababa University, 2015-11) Girma Andualem; Ferede Tadele
    The objective of this study is to investigate the determinants of export performance and employment of labor in large and medium scale manufacturing industry of Ethiopia using a time series data from 1978/79 to 2012/13. In this study, effort has been made to identify the long run and short run determinants of export performance and labor employment in large and medium scale manufacturing industry of Ethiopia using an ARDL bounds testing approach and ECM to capture both long run and short run elationships. The estimated results for the determinants of export performance revealed that the market size of the home economy, Europe and domestic infrastructure are positive and statistically significant determinants of export, while the market size of Africa (excluding Ethiopia) and real effective exchange rates (REER) have a negative impact on export of large and medium scale manufacturing industry of Ethiopia. But the market size of the United States of America and the Far East are found statistically insignificant. However, in the short run, the market size of the United States of America found statistically significant which goes with the African Growth opportunity act though the market size of Far East still insignificant. The market size of the home economy and domestic infrastructure are positively significant not only in the long run, but also in the short run and the market size of Africa and REER are also statistically insignificant in the short run. The speed of adjustment has the value 0.7959 with a negative sign, which showed the convergence of the export model towards its long run equilibrium. As for the, determinants of labor employment, the result shows that the skills of employee’s, export and real lending interest rate are both statistically significant in the short and long run, while the real wage rate has a significant effect only in the short run. Furthermore, both the value added per person engaged, a measure of labor productivity, and efficiency are statistically insignificant both in the long run and short run. The speed of adjustment in the employment model is 0.4554. Finally, the major policy implication of this study is, prioritizing investments to words capital goods and enhancing skill capacity of workers through short and long term trainings by the manufacturers for the employee and empowers the managers
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    Economic Growth and the Quality of Life Nexus in Ethiopia: A Time Series Analysis
    (Addis Ababa University, 2013-06) Asmare Esubalew; Ferede Tadele
    To what extent are improvements in quality of life (material living levels, consumption, education/literacy, urban dwelling, political and civil rights, and the like) associated with economic growth? International comparisons of quality of life (QOL) conditions usually point to a strong positive association with real GDP per capita. This study investigates the nexus between economic growth and quality of life using objective indicators (economic, social and political representative variables) in Ethiopia for the period 1981 to 2011. Applying both descriptive and econometric analyses, the study uses the long run and short run estimation approaches for econometrics part. The results from the descriptive analysis confirmed that on average, all the variables in the objective indicators of quality of life have shown a rising trend. Moreover, among these, education enrollment and per capita consumption expenditure have shown strong correlation with economic growth. The empirical results indicated that, the relationship between economic growth and objective indicators of quality of life is significant (at 1 %) with a positive sign in the long run. In the short run, economic growth has significant (at 5%) relationship with per capita consumption expenditure and gross education enrollment ratio and insignificant relationship with political freedom. The study also identified the existence of considerable relationship among the QOL indicators. It suggests adjustments in the short run path of economic growth and urbanization
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    Economic Implications of Climate Change in Ethiopia: A Computable General Equilibrium Analysis
    (Addis Ababa University, 2011-06) Belayneh Ashenafi; Ferede Tadele
    Climate change has become one of the pressing problems worldwide as it affects socio-economic activities - agriculture being one of the most vulnerable sectors. Specifically, this study has attempted to evaluate the short-run economic impacts of climate change (change in the levels of temperature and precipitation) with a focus on the Ethiopian economy. In so doing, it uses a computable general equilibrium model based on the 2005/06 Ethiopian Social Accounting Matrix. The results show that climate change has a dampening effect on economic growth and many key macroeconomic indicators. Investment is the only macroeconomic variable that increases despite the changes in climate. It has also a negative impact on sectoral growth and trade, and the effect varies across agro-ecological zones. The findings further revealed that household livelihoods (measured in terms of income and welfare) have declined, and the effect is unevenly distributed across different household groups. The highest losses are likely to be incurred by the poor households that are residing in smaller urban centers. Thus, the results of the study calls for improved climate adaptation actions to reduce both economic decline and welfare deteriorations
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    Economic Linkages and Policy Shocks in Ethiopia: Social Accounting Matrix (SAM)-Based Multiplier Analysis
    (A.A.U, 2000-05) Ferede Tadele; Geda Alemayehu
    The objective of this study is to examine .the magnitude of sect oral linkages and the potential impact of policy- induced changes on the Ethiopian economy. To, carry out this, social accounting matrix (SAM)-based multiplier is used. The social accounting matrix consists of fifteen production activities. two factors of production (labor and capital), three institutions, namely, rural households, urban households, and government. one combined capital account, and the rest of the world. This study indicated that the direct interdependence of the Ethiopian economy is limited. When general equilibrium effects are taken into consideration, agriculture is found to be superior, through income and consumption linkages, in terms of stimulating economic growth in the country. Of the industrial sub sectors, food processing. metals, beverage, and textile have strong linkages with the rest of the economy. The study pointed out that targeting rural areas is impo11ant to eliminate rural and urban poverty simultaneously. The study also showed that complete elimination of fertilizer subsidy has brought a decline in sect oral output , household income. and private savings. The study indicated that sect oral investment pro grammers, particularly investments in agriculture have stimulated sect oral output and household income. It also indicated that increasing coffee exports have substantial impacts on stimulating growth and household II1comes. It follows that to bring long-term development. emphasis should be directed towards the transformation of the rural areas in general and agricultural sector in particular and selective promotion of industrial subsectors. It is also crucial to reconsider the implication of'fel1ilizer subsidy elimination.
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    The Effect of Improved Productivity of the Manufacturing Industry on the Ethiopian Economy: A Computable General Equilibrium Analysis
    (Addis Ababa University, 2012-06) Berhane Bethelhem; Ferede Tadele
    Ethiopia’s manufacturing industry is at the onset of development though there are recent upsurges in the number of firms. This study examines the effect of productivity improvement of the manufacturing sector on the macro economy, sectoral output, factor and household income and welfare of households. In order to investigate this impact, the study utilized the recursive dynamic computable general equilibrium (CGE) model. The recently updated 2005/06 Ethiopian SAM was used to calibrate the CGE framework. Three policy simulations of high, medium and low TFP growth rates were simulated on textile, leather, agro processing, and non-agro processing and overall manufacturing activities. The study demonstrated that the manufacturing sector is a key driver of economic growth in particular; the findings suggest that productivity increase in textile, agro processing, and non-agro processing and overall manufacturing sector largely increases real GDP and sectoral outputs. Moreover, both rural and urban households are well-off in all the policy simulations. However, increasing the TFP of the leather sector alone showed no significant change on the macro variables like; real GDP, absorption, private consumption and investment. It also resulted in welfare loss to all households except rural poor. The study further extends its recommendation for Ethiopia to develop a strong industrial policy aimed towards promoting both agro and non-agro processing industries.
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    Effect of Trade Openness on Inflation in Ethiopia (An Auto Regressive Distributive Lag Approach)
    (Addis Ababa University, 2014-10) Feleke Meseret; Ferede Tadele
    This study empirically examine the effect of trade openness on inflation in Ethiopia using annual time series data over the period 1970/1971-2010/2011 by applying auto regressive distributed lag(ARDL) model for inflation. The control variables that are included in the inflation equation are gross fixed capital formation, money supply, per capita income and government consumption expenditure. The objective of this study is to test the applicability of Romer hypothesis in Ethiopia. In the contrary to Romer hypothesis the finding of the study indicates that the role of trade openness on reducing inflation is insignificant both in the long run and short run. The result of the study confirms that among the control variables included in the inflation equation, gross fixed capital formation significantly reduce inflation. But money supply, per capita income and government consumption expenditure have a positive and significant effect both in the long run and short run. The most important policy implication that comes out of this study is that the policy makers should focus on measures other than external trade sector such as money supply and government expenditure in devising policies to combat and reduce domestic inflation.
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    Effects of Customs Tariff Reduction on Ethiopian Trade and Economic Growth: A Co-integrated Var Model Approach
    (Addis Ababa University, 2016-06) Lambebo Desta; Ferede Tadele
    Customs tariff plays an important role in the Ethiopian trade and growth. It contributes a vital share in revenue generation needed to finance the economy. The reviewed empirical literature has indicated that the effects and contribution of customs tariff to the government budget in Ethiopia are not yet identified. Specifically, the importance of imposing customs tariff, the share of customs duty in the public revenue, its revenue productivity and its determinants are yet studied. This can negatively affect the fiscal role of customs tariff in the country and may also distort the decisions of the policymakers. For this research, secondary macroeconomic data for the period between 1975/76 and 2014/15 Ethiopian fiscal years, were collected mainly from the Ministry of Finance and Economic Cooperation (MoFEC), the Ethiopian Revenues and Customs Authority (ERCA), and additionally from other sources. Extensive theoretical and conceptual reviews, simple descriptive statistics, and co-integrated VAR model is applied to analyze the data. Accordingly, the major reasons to impose tariffs on imported goods are found to be revenue generation, protection of domestic industries, reducing the balance of payments and trade deficits, and capital formation. Simple descriptive statistics have shown that customs tariff, in the form of customs duty, has very significant share (36%, and15%)in the foreign trade taxes, and total taxes, respectively) in the Ethiopian tax structure. Although the contribution of customs duty in the Ethiopian government revenue is significant, the customs duty has been neither buoyant nor elastic. This implies that both the direct discretionary and non-discretionary measures have not yet brought the buoyancy and elasticity of the customs duty to the unitary level. The long-run equilibrium equation shows that, citrus paribus, direct and indirect domestic taxes, foreign trade taxes (FTT) and exchange rate have positive and significant impact on economic growth (GDP). Other independent variables (import, weighted average customs tariff rate, and revenue from customs duty) have a negative but significant impact on economic growth. Key words: customs tariff, customs duty, tariff liberalization, co-integrated VAR model, openness, trade, revenue productivity
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    Effects of Tariff Reduction and Tax Replacements on Growth, Poverty And Income Distribution in Ethiopia: A CGE-Microsimulation Analysis
    (Addis Ababa University, 2011-06) Kebede Alekaw; Ferede Tadele
    This study utilizes a 15-sector static CGE model of International Food Policy Research Institute for Ethiopian economy. The study also used the Distributive Analysis (DAD) software to compute poverty and inequality indicators. Increasing domestic tax rates (that is, replacing the tariff revenue lost with either direct tax or indirect tax) increased exports of most agricultural commodities and industrial imports causing the domestic industries to contract in production and employment. Effects on GDP, consumer’s welfare, factor rewards, poverty and income distribution are mixed. Replacing tariff by direct tax improved all these variables marginally by increasing changes in factor rewards and decreasing the price level (CPI). On the other hand, replacing tariff by indirect tax has worsening effect by deteriorating the changes in factor rewards and increasing the relative prices (CPI).
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    The Impact of Foreign Aid on Government Expenditure in Ethiopia: An Application of Vector Error Correction Model
    (Addis Ababa University, 2014-06) Mohammed Abas; Ferede Tadele
    Foreign aid represents an important source of finance in most countries in sub-Saharan Africa (SSA), where it increases government’s expenditure, supplements low savings, narrow export earnings and thin tax bases. In this paper, a welfare utility maximization function is used and the necessary diagnostic tests undertaken to determine how government spending respond to aid flows. It employs a co-integrated error correction model to account for potential endogeneity and non-Stationarity problems. The empirical results indicate that the flow of foreign aid does influence government spending patterns. It supports the hypothesis that in Ethiopia, during 1966 – 2013, foreign Aid has a positive effect on total government expenditure. Foreign aid is fungible in Ethiopia, it flows to unintended purpose. Disaggregating the data into capital and non- development expenditures, like general service expenditure and defense expenditure, the relationship has been examined. Capital expenditure is positively and significantly affected by foreign Aid and also Foreign Aid finances Non- developmental Expenditures. The study also provides evidence that policy change increases total and capital expenditures significantly. Taking into account Foreign aid influences government expenditures positively the government has to design effective strategy that enhances flow of foreign aid to the capital expenditure and protecting from non-developmental sectors.
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    Impact of Government Expenditure Shock on Private Investment in Ethiopia: A Recursive Dynamic CGE Analysis
    (Addis Ababa University, 2017-06) Regassa Haile; Ferede Tadele
    Ethiopian government targeted sustainable economic growth with stable macroeconomic environment through expanding government expenditure, revenue and private investment. But the relationship between government spending and private investment is source of controversy in both theoretical and empirical perspective. This study examines the impact of government expenditure specifically (human capital, electricity and public consumption) shock on private investment using a recursive dynamic CGE model with the recent SAM of the country. To see the impact of each categories of spending we use four source of finances which include shift of resource from public administration, tax, foreign saving and tax and foreign saving for both human capital and electricity spending but one source which is tax for public consumption spending. Under all sources of finance, human capital and electricity spending exert positive impact on variables under consideration including private investment which easily reconciled with Keynesians argument. But the size of impact of each spending under each source is different. Both human capital and electricity financed via foreign saving bring a greater positive impact on private investment in Ethiopia. In contrast to this, public consumption financed via tax imposes negative impact on all variables including private investment which can be reconciled with neoclassical view. Therefore, financing human capital and electricity spending via foreign saving and decreasing public consumption is sound to bring private investment to desired place in the country Key words: Government expenditure, Private Investment, SAM, CGE
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    Impact of Government Expenditure Shock on Private Investment in Ethiopia: A Recursive Dynamic CGE Analysis
    (Addis Ababa University, 2017-10) Regassa Haile; Ferede Tadele
    Impact o f Government Expenditure Shock on Private Investment in Ethiopia: A Recursive Dynamic CGE Analysis Haile Regassa Badassa Ethiopian government targeted sustainable economic growth with stable macroeconomic environment through expanding government expenditure, revenue and private investment. But the relationship between government spending and private investment is source of controversy in both theoretical and empirical perspective. This study examines the impact of government expenditure specifically (human capital, electricity and public consumption) shock on private investment using a recursive dynamic CGE model with the recent SAM of the country. To see the impact of each categories of spending we use four source of finances which include shift of resource from public administration, tax, foreign saving and tax and foreign saving for both human capital and electricity spending but one source which is tax for public consumption spending. Under all sources of finance, human capital and electricity spending exert positive impact on variables under consideration including private investment which easily reconciled with Keynesians argument. But the size of impact of each spending under each source is different. Both human capital and electricity financed via foreign saving bring a greater positive impact on private investment in Ethiopia. In contrast to this, public consumption financed via tax imposes negative impact on all variables including private investment which can be reconciled with neoclassical view. Therefore, financing human capital and electricity spending via foreign saving and decreasing public consumption is sound to bring private investment to desired place in the country Key words: Government expenditure, Private Investment, SAM, CGE
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    The Impact of Income Inequality on Economic Growth in Ethiopia: ARDL Approach
    (A.A.U, 2021-09) Sisay Andualem; Ferede Tadele
    Identifying the impact of income inequality on economic growth has paramount importance for shared and broad-based economic growth. Thus this study was conducted to examine the effect of income inequality on economic growth evidence from Ethiopia. To achieve this objective time series data from 1982 to 2019 was used and it is examined by using ARDL estimation technique. Economic growth was used as dependent variable and income inequality, population growth, urbanization, inflation and financial development were used as independent variables. The estimation result revealed that in the long run urbanization, financial development, population growth and income inequality have positive significant effect. While in the short run urbanization and financial development have negative significant effect, but population growth and income inequality have positive significant effect. The coefficient of the ECM is negative 0.913 and this signifies that a deviation from the long-run equilibrium subsequent to a short-run shock is corrected by about 91.3 percent at the end of each year. Based on the findings the study recommends that the government and other concerning body the government has to implement pro-poor strategy to include all section of the economy from the benefits of growth, improving the performance of secondary market.
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    The Impact of Trade on Poverty in Ethiopia: A Sequential Dynamic Computable General Equilibrium Micro Simulation Analysis
    (A.A.U, 2012-06) Assefa Ashenafi; Ferede Tadele
    This study tries to address the impact of trade on poverty by way of agricultural total factor Productivity (FFP). In doing so, we employ a Sequential Dynamic Commutable General Equilibrium Model linked to a Micro Simulation Model. We also used econometric model to Estimate the agricultural TFP of Ethiopia. For these purpose, we utilized the data of the 2005/06 SAM of EDRI (Ethiopian Development Research Institute), the 2004/05 HICE (Household Income Consumption Expenditure) survey conducted by CSA (Central Statistical Agency of Ethiopia), different years of agricultural sample surveys of CSA and the ITC UNCTAD data. The estimation results of this study shows that trade openness and fertilizer application have Positive impact on agricultural TFP. But seeds, irrigation and extension have negative impact on Agricultural TFP. We also found that the proposed tariff cut, trade induced agricultural TFP and improved agricultural TFP due the application of fertilizer results in an increment in all Macroeconomic variables. However, poverty due to trade openness and tariff reduction Exacerbate poverty during the simulation period.
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    Macro-econometric Modelling of Ethiopian Economy and its Policy Implication: An Eclectic Approach
    (Addis Ababa University, 2011-11) Tebekew Tewodros; Ferede Tadele
    The paper presents a small macroeconometric model by categorizing the working of the economy in to aggregate demand, aggregate supply, monetary sector, and price sector. The model is estimated using data from 1970/71 to 2008/09 employing an eclectic approach, the Engle-Grager two step procedure and Autoregressive Dynamic lag Model (ARDL) approach of Pesearan et al (2001) to obtain the cointegrating relations and short run dynamic model. The construction of the model follows the lines of aggregate supply - aggregate demand framework. The adequacy of the model and its forecasting accuracy is checked using MAE, MAPE, RMSPE and Theil’s inequality coefficients. And the model is found to track endogenous variables well for the given sample period. Policy simulation using the dynamic simulation method compares the dynamic responses to the fiscal policy in the form of expansionary government has an expansionary effect on domestic output, however followed by inflation and crowding out of private investment. The other simulation is a monetary restraint policy in the form of reducing domestic credit is effective to alleviate inflation and improve the trade balance though it is less effective to increase domestic output. Ethiopian economy is found to be highly susceptible to external shock and an increase in imported price level results a contraction in domestic output and creates inflation in domestic economy and a reduction in both export and import level of the country.
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    Macroeconomic Effects of Foreign Aid in Ethiopia using Dynamic Computable General Equilibrium Model
    (Addis Ababa University, 2014) Kahsay Nguse; Ferede Tadele
    Macroeconomic effects of foreign aid depend on how it affects savings, investment and government behaviour. The study used recursive dynamic general equilibrium (DCGE), auto regressive distributed lag model approach to cointegration (ARDL) and vivid three gap based descriptive reports aiming to find out the preponderant effect. The data used in descrptive analysis and ARDL were collected from World Bank, Organization for Economic Cooperation and Development, and International Monetary Fund data bases. DCGE requires social accounting matrix (SAM) and that was obtained from Ethiopian Development Research Institute (EDRI). The SAM was built in 2005 and updated its key accounts in 20091. Using recursive DCGE, the study shows that aid inflow can result in export reduction and exchange rate appreciation. But, it leads to higher gevernemt revenue, expenditure and savings. Aid‟s effect in total absorption and gross domestic product is not discernible. Thus, the study‟s results are ambiguous to generalize. The long run results of the ARDL model also show significant positive relationship between national income and domestic savings. However, the relationsip between Development Assistance Committee (DAC)-aid inflow and domestic savings is significantly inverse2.1 The recursive feature of the model ensures generation of SAM in years when SAM was not actually collected. 2 A 1 unit increment in DAC-aid inflow results in 0.5 unit reduction in domestic savings.
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    Modeling and Forecasting Currency in Circulation in Ethiopia
    (Addis Ababa University, 2014-06) Semate Getahun; Ferede Tadele
    In the literature, Currency in circulation is typically estimated either by specifying a currency demand equation based on the theory of transaction and portfolio demand for money or univariate time series models. The first approach works well with low frequency data but faces limitations with high frequency data series. Using monthly and weekly data of currency in circulation form May 2007 to April 2014, the paper proposes an alternative approach in modeling the high frequency data series by using Multivariate time series (structural model and VAR) univariate time series(trend and ARIMA) Model. The four separate models were estimated with monthly, and two separate models with weekly time series, assembling tools for forecasting trend, seasonal patterns and cycles in individual series separately. Trend and seasonal effects were identified by regressing on trend and seasonal dummies while cyclical dynamics were captured by allowing for ARMA effect in the regression disturbances. The monthly and weekly models clearly identify both intra –month and inter-month variation of currency in circulation. The monthly trend model also indentified that Ethiopian New Year has significant positive impact on demand for currency in Ethiopia. Finally model comparison result showed both monthly VAR, and trend models outperforms the structural and ARIMA models and trend model performs the weekly data wheel at 5% level of significance. In general this methodology may be used in forecasting currency in circulation with careful assessment of month to month and week to week current developments in the economy.
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    Prospect and Retrospect of Exchange Rate Shocks on Manufacturing and Exports of Ethiopia: CGE Model Analysis
    (Addis Ababa University, 2011-06) Fekadu Tizazu; Ferede Tadele
    In this study, the positive and negative consequences of deliberate shocks to Ethiopian Birr have been examined. The focus areas of the analysis includes: domestic production, real consumption,welfare, export, import, trade balance, and current account. It also addresses impacts on employment, investment, government revenue and economic growth. A static CGE model is employed so as to observe the multi sectors and multi activities effects of the shocks. The outcomes of the simulations are checked for their robustness through sensitivity test. They have been also interpreted counterfactually for the short run to medium term effects. The findings of the analysis reveal that the productions of agricultural and service sectors expand where as that of the industrial sector shrinks. Particularly, exportable agricultural products and non tradable service sector derive more returns. Even if the light and some heavy manufacturing are benefited, the significant and adverse effect on construction sub sectors largely outweighs. Besides, exports grow faster than imports. On the other hand, trade balance continuous to increase negatively whereas current account partly improves and partly deteriorates under different shock levels. By and large, real consumption, welfare, GDP, investment and government revenue are all adversely affected. And, thus, the economy of the country would have been restrained in the short run had the exchange rate been shocked in line with the scenarios. Key words: Exchange rate shocks, exports, manufacturing, Ethiopia, and CGE model