Browsing by Author "Tekle Biruk"

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    The Impact of Exchange Volatility on the Agricultural Exports of Sub Saharan African Countries
    (Addis Ababa University, 2012-06) Tekle Biruk; Birhanu Wassie
    The abandonment of the fixed exchange rate systems has caused exchange rate movements to become a major concern for traders, policy makers and researchers. Numerous studies have been conducted to determine whether exchange rate volatility affected international trade flows. Nevertheless, no general consensus has been reached as to the magnitude and direction of the impact of exchange rate volatility on trade flows. This paper investigates the impact of exchange rate volatilities on the agricultural exports of Sub Saharan African countries. Twenty nine sample SSAcountries were selected for the period 1996-2008. Estimation is made using random effects model, difference generalized methods of moments (GMM) and systems GMM. Volatilities of the official exchange rate of SSA countries was generated using GARCH (1,1) and ARCH models. The Standard gravity model augmentedby variables which affect the trade between the SSA countries and the major trading countries is estimated. Exchange rate volatilities is found to have a negative and significant impact on the agricultural exports of the SSA countries across the different estimation techniques. Trade policies that are designed to increase exports might create uncertainty in the exchange rate and ultimately end up reducing exports. The main lesson drawn from the study is, SSA countries should have a stable exchange rate policy Key words: Exchange rate volatilities, gravity model, system GMM, GARCH , ARCH