Applied Economic Modeling And Forecasting (Fiscal Policy Analysis And Planning)

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The Performance of Coffee Marketing in Ethiopia: The Case of IIIubabor and Jimma Zones
(A.A.U, 1996-06) Tesfay, Solomon; Amha, Wolday (Dr)
During the era of Derg, there had Deen state monopoly in the coffee trade. the state coffee markecing parastatal (Ethiopian Coffee Marketing Corporation ) wa s ope rating based on fixed price arrangements . Once the state parastatal is in place entry t o the coffee trade was difficult . The system has also reduced competition among traders. The long term effect of such a move was .suppression of producer incentive and production. Hence it was apparent to the transitional government of Ethiopia to liberalize the coffee market at all levels. The main objectives of this study are: i ) to describe the coffee marketing system in illubabor and Jimma zones, ii} to assess the structure of coffee marketing in the study area , iii} to measure the efficiency of the coffee marketing system, and iv} to assess the effect of the reform on performance of coffee marketing and to provide basic information which assist policy analysis. The analysis was carried out by using S-C-P approach. The results show that the liberalization policy adopted has achieved certain improvements in the structure and efficiency of the coffee trade. The reform have lifted the licensing barrier and reduced tax levied on coffee trade and license issuance fees. It has also abounded the restrictions imposed on licensing. The reform have also resulted in the free movement of prices. The bivariate correlation analyses shows that prices in the selected markets are highly integrated with the central market. The Timer's indices and the co integration test also show the same result. There are, however, a lot of shortcomings in the structure and inefficiencies in the coffee marketing . There are high market concentration, lack of capital and credit, and restrictions on areas of operation. In some markets there is also poor market information flow among traders. In view of the efficiency, there appears to be significant seasonality and inter - temporal price inefficiency.
Government Support and Export: A DID Approach
(2008-06) Regassa, Eyerusalem; Demeke, Mulat (PhD)
The government of Ethiopia have been trying to create a good environment for investors and exporters of non-traditional product by providing different export and investment incentives. Among these are the Export Trade Duty Incentives and Export Credit Guarantee Scheme. This study investigates the impact of these schemes on export. A Difference -in-Difference methodology was used to estimate effects of the two export incentives adopted in Ethiopia. With data for individual exporters of the year 2000and 2002 , the DID estimation shows significant impact of export incentives on export .But this should not be over emphasised ,one has to look at the costs for the government either in terms of foreign exchange or opportunity cost of the funds to the country. The government have been providing substantial amount of support to exporter up on their demand to hit the intended target with out no cross checking of whether the subsidy have been used properly or not as long as the firm export the targeted amount. Hence thinking of what this funds could do in other sector or areas of investment. As well thinking of how little variation of export is explained by subsidy as it shown in the DID methodology. The government should consider the cost of subsidy hand in hand with the gain from this subsidy.
Gender Earnings Wage Differential in the Ethiopian Public Sector
(Addis Ababa University, 2008-06) Yuya, Abdi; Mulat, Teshome (Prof)
I would like to express my sincere thanks, deep sense of gratitude and indebtedness to my adviser Professor Teshome Mulat for his keen interest, valuable guidance, and sustained help for the completion of this thesis. I am grateful to the graduate school of Addis Ababa University for financing this thesis. I am also delighted to express my heart felt gratitude and sincere thanks to my dear wife Ajiba Mohammed, my brother Ato Ahmed Yuya, and my friend Fuad Usmail for their unfailing support and moral encouragement throughout my study time. I am thankful to my friend Malaku Teklea for his relentless cooperation in searching documents and data management. My heart felt thank also extends to the Federal and Oromia Civil Service Commissions, UNECA library, Central Statistical Agency, and Ministry of Education for providing the required data and documents. My special thanks also go to Ato Tekalign Birhane, the commissioner of the Oromia Civil Service Commission, for his invaluable support. I am thankful to the Oromia Ethics and Anti Corruption Commission for sponsoring my study and to w/o Aberash Tamiru for typing this thesis in an attractive manner. Finally, I would like to notify that any unintentional omission in this brief acknowledgement does not mean lack of gratitude.
Foreign Direct Investment and Uncertainty in Africa
(Addis Ababa University, 2012-06) Andargie, Ephrem; Mulat, Teshome (Prof); Hassen, Syed (PhD)
In the past two decades, there has been a significant increase of FDI flow to all developing countries. However, Africa still lags behind in the attraction of this investment. Why African has received a little FDI inflows as compared to other developing countries is the starting question of this study. Theories suggest that the prevailed uncertainty in Africa is considered as a reason for the poor FDI attractions. Having this concept, the paper examines weather macroeconomic uncertainty and political instability affect inflow of foreign direct investment (FDI) to Africa. The study estimates both fixed and dynamic GMM Panel-data models using data from 25 African countries over the period 1995 to 2009. Unconditional standard deviations are applied to capture macroeconomic volatility and state fragility indices are taken to measure political instability and institutional strength towards corruption. We find that macroeconomic volatility proxied by inflation has a deleterious impact on FDI inflows to Africa while exchange rate volatility has no statistical significance. We also find that level of corruption and political instability are not statistical significance Key word: FDI, Macroeconomic Uncertainty, Political instability and co
Inflation and Economic Growth: An Estimating of Threshold Level of Inflation in Ethiopia
(Addis Ababa University, 2014-06) Feyisa, Admasu; Tuffa, Adane (PhD)
One of the prime objectives of macroeconomic policy both in developed and developing countries are to achieve economic stability and obtain sustainable economic growth simultaneously with price stability. This study, therefore, seeks to estimate the optimal level of inflation using quarterly time-series data for the period 1991 – 2013, which is conducive for economic growth in Ethiopia by following the Khan and Senhadji (2001) methodology. Based on the approach adopted, it is found some evidence that inflation has a threshold effect on economic growth. Estimated threshold model indicate that there is non-linear relationship between economic growth and inflation in the Ethiopian economy and the threshold level of inflation for GDP growth is 10 percent. As an inflation targeting country, this is a crucial finding as it provides a baseline study in search of the optimal level of inflation for growth. These findings are essential for monetary policy formulation by the National Bank of Ethiopia, whose primary objective is the achievement and maintenance of price stability, as it provides a guide for the Bank to choose an optimal inflation rate, which is consistent with long-term sustainable economic growth goals of the country
The Effect of Remittances on Household Expenditures and Labor Supply in Ethiopia: Evidence from Ethiopian Rural Household Survey.
(Addis Ababa University, 2014-06) Ejeta, Genet; Tuffa, Adane (PhD)
The study examined the impacts of remittances on household expenditures and labor supply in rural households in Ethiopia. Specifically, the paper investigates the extents to which receipts of remittances affect the consumption and investment behaviors of rural households. The study employs two-part model (Hurdle model analyses in order to estimate the impact of household expenditure within Engle‟s Curve framework .The result indicates that there is no strong link between receipt of remittances and productive investment expenditures. The study finds that households receiving remittances spend, on average ceteris paribus, a larger share of their budget on consumption of food and a smaller share on than do households receiving no remittances. This implies that migration and remittances are used as a short term coping strategies and hardly used as stepping-stone to productive investment options. Therefore, designing policies that increase the inflow and usage of remittances are vital. Policies include: improving the operation and service of financial institutions, providing incentives and training for remittance recipients to be designed. This paper also examines the impact that remittances has on the remittance-receiving households‟ labor supply decisions, specifically examining how they affect off-farm work effect of using panel data. The study aims to investigate how the received remittances are affecting the recipient household‟s labor supply by applying the neoclassical model of labor-leisure choice, and by analyzing data on ERHS. The finding from Tobit model shows that remittances affect labor supply negatively for both men and women (especially women) and these results thereby contribute to the understanding of how this aspect of migration affects the households and source countries‟ economy. Key Words and Phrases: Remittances, labor supply, Household expenditures and investment, Rural households, Panel data.
The Effects of Shocks to Ethiopian Monetary Policy on Price and Output: SVAR Approach
(Addis Ababa University, 2014-06) Geremew, Anteneh; W/hanna, Tassew (PhD)
The Effects of Shocks to Ethiopian Monetary Policy on Price and Output: SVAR Approach Anteneh Geremew Addis Ababa University, June 2014 The main objective of this paper was to model and investigate the effect of shocks on Ethiopian monetary policy in to output and price using SVAR methodology. Using quarterly data 1995Q3 to 2011/12Q4, SVAR model is developed. Both the domestic (GDP, CPI, M0, T-bill rate) and foreign variables (OPI and WCPI) were used to investigate the Ethiopian monetary policy framework. I have imposed a contemporaneous restriction based on economic theory in order to provide some economic structure to Ethiopia SVAR. The results of innovation accounting analyses, generated from the SVAR model suggested that a positive shock to reserve money increased output significantly with a considerable lag spans one quarter, while price respond to a positive shock to reserve money negatively for a period of one and half and after this period it was increased and sustained for long periods. A notable difference with the monetary policy variables (reserve money and T-bill rate) shock effect on output and price were obtained. I obtained that the variability of price and output due to shock to reserve money was more explained than T-bill rate shock in the short term as well as the long term horizons. Finally, based on the findings I have drawn my recommendations. The finding indicated that in the short term and long term variability of price and output were more explained due to shock to reserve money than T-bill rate shock, therefore, the NBE should be ensure that reserve money and interest policy are consistent with each other and further studies should be needed to identified different monetary transmission mechanisms or cannels in Ethiopia
Monetary Policy and Exchange Rate Shock on Ethiopian Trade Balance: Using SVAR Approach
(Addis Ababa University, 2014-06) Abinet, Chalachew; Hasan, Syed (PhD)
This paper investigates monetary and exchange rate policy shock on Ethiopian trade balance. Trade balance is the most important macroeconomic variable in every country due to its importance for economic growth and it is affected by monetary and exchange rate policy. To accomplish this study the researcher used Structural Vector Autoregressive model. The time series data included for the study was quarterly data starting from quarter on 1997/98 to quarter four 2012/13. The variables included under study was trade balance which is expressed as a ratio of export to import, consumption gap(foreign- domestic), consumer price index gap(foreign- domestic), reserve money and real effective exchange rate. Stationarity of time series data was tested using ADF test. To select the best lag length information criteria BIC and AIC and others were used lag two was selected as the best lag length. Johansen cointegration test was used to test the existence of long run relationship among variables. SVAR restriction approach based on theory was applied to analyze these variables. The impulse response result shows that exchange rate appreciation improves the trade balance in the short run and deteriorates in the long run which supports the J curve effect. But expansionary monetary policy does not support the existence of J curve effect rather it has cyclical pattern and it affects the trade balance through expenditure switching effect. The expansionary monetary policy dominates the exchange rate effect on explaining the Ethiopian trade balance fluctuation
The Impact of Public Final Consumption and Investment Spending on Economic Growth in Ethiopia: An Application of Vector Error Correction Model
(Addis Ababa University, 2014-06) Abdulaziz, Adnan; Mekonnen, Alemu (PhD)
The objective of this paper was to investigate the impact of public sector investment and final consumption expenditure on economic growth using time series data on Ethiopia (for 54 years). In addition, it intended to explore the pattern and relative impact of public and private consumption and investment decision on the economy. I formulate a simple growth accounting model, adapting Ram (1986) in which total government expenditure is disaggregated into expenditure on (physical) investment and final consumption. The analysis is based on time series data covering the period 1960-2014. The study applies the augmented Dickey Fuller test for stationarity and Johansson co-integration test used to determine whether there is a long run relationship between variables. Vector error correction model is applied to estimate both short and long run models related with Real Gross Domestic Product of Ethiopia. The empirical results suggest that in the long run government investments and final consumption has positive and negative effect on economic growth, respectively. Similarly, private investment, private final consumption and primary education enrolment rate have positive effects on economic growth. However, all variables included in the model except government consumption do not have an impact on economic growth in the short run
Can the Monetary Authority Control the Stock of Money Supply in Ethiopia an Empirical Investigation
(Addis Ababa University, 2014-06) Desalegn, Gashaw; Ferede, Tadele (PhD)
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.
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 (PhD)
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.
Modeling and Forecasting Currency in Circulation in Ethiopia
(Addis Ababa University, 2014-06) Semate, Getahun; Ferede, Tadele (PhD)
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.
The Fiscal Effects of Foreign Aid in Ethiopia
(2014-07) Seid, Amir; Geda, Alemayehu (PhD)
This study tries to examine the effects of aid inflows on the government fiscal behavior, such as, taxation, borrowing and the allocation of other expenditure in Ethiopia by using a time series data from the period 1960-2012. There are five models, these models analyzed by applying the VECM and impulse response analysis. The results of the models indicate that an increase in grant results in an increase in the total tax revenue and total expenditure. But the disaggregation of tax revenue gives a different result on tax collection effort. The flow of grant has a tendency to decline direct tax collection effort. And also grant has a decrease effect on domestic borrowing, whereas the flow of grant encourages the government to increase both capital and recurrent expenditure. However, in relation to loan the result shows that loan has no effect on the fiscal components. Moreover, a model that includes ODA instead of either one of the two external financing components is estimated. The reason of incorporating ODA is that aid disbursed outside the budgetary framework can also affect government spending decisions. The results of an increase in ODA are similar to those of an increase in grants. Direct taxes and domestic borrowing fall, whereas recurrent expenditure rises. In addition, in the long run both capital expenditure and indirect tax affected by the flow of ODA in small amount. This might show ODA is more pro-consumption than investment and also aid and domestic borrowing are close substitutes.
The Relationship between National Saving and Economic Growth in Ethiopia: ARDL and Granger causality Approaches
(2016-06) Mesfin, Abel; Ferede, Tadele (PhD)
Achieving a high and stable economic growth rate is an important issue for every country as economic growth is crucial for economic development. The objective of the paper is to investigate relationship between savings and economic growth in Ethiopia. The study analyzes the long-run causality between national saving and economic growth in Ethiopia‟s economy. Annual data for the period 1975-2013 is used; an Autoregressive Distributed Lag Model and Granger causality are attributed for the empirical results. The results of the study show that there is a negative and insignificant impact of savings on economic growth. In addition Granger causality test showed that there is a unidirectional causality from gross national product to national savings.
The Financial Determinants of Private Sector Investment: The Case of Ethiopia
(Addis Ababa University, 2016-06) Teklay, Brhane; Guta, Fantu (PhD)
This study mainly emphasized on the financial determinants of private sector investment in Ethiopia using annual time series data from1975-2015. Using Johansen co integration test they have a significant relationship among variables and OLS regression analysis was undertake to estimate long run model and ECM has been used to find out the short run dynamics. In both long run and short run model the financial determinants variable like broad money supply, bank credit and availability of foreign exchange were positive relation with the private investment. The other macro variable taken was the capital expenditure, which is negatively affect in the long run and positively affect private investment in the short run. The researchers conclude based on past literature result’s capital expenditure is positively association with private investment. The short run dynamics of estimated coefficient ECM which suggests a relatively quick speed of adjustment back to the long-run equilibrium. The findings of the study provide evidence that private investment in Ethiopia, like in other developing countries is affected by important financial and macroeconomic variables. The empirical evidence however has certain important policy implications, and in view of that recommendations have also been provided, in an attempt to help increase and stimulate private investment in Ethiopia. Key words: Ethiopia, private investment, financially determinants, Johannes co-integration.
The Economy -wide Impact of Continental Free Trade Area (CFTA) on Ethiopia: A Recursive Dynamic Computable General Equilibrium Approach
(2016-06) Hailemeskel, Begidu; Estiphanos, Girma (PhD)
This study examines the economy wide impact of CFTA on Ethiopia. The analysis is made based on Ethiopian social accounting matrix (SAM) of 2009/10 constructed by EDRI. The study has utilized a recursive dynamic CGE model. The model is simulated for an import tariff reduction on different sectors using three different scenarios. The scenarios involve joining CFTA at one time, in 2016, or through phases, a 25% tariff removal each year from 2016-2019. Another scenario involves excluding strategic sectors from the CFTA. The impact of CFTA result shows, Government revenue also decreases as tariff revenue is an important source of revenue for the Ethiopian government. GDP and trade balance are, however, positively affected. The increase in GDP might be associated to the increase in disaggregated production. The larger increase in exports as compared to the increase in imports leads to an improvement in trade balance. Household consumption expenditure also increases. This might be due to the availability of cheap consumption commodities from abroad due to the removal of tariff. On the other hand, our results show a decrease in investment which might be attributed to the inability of domestic producers to compete with foreign suppliers at a lower price. Our findings also show that protection of strategic sectors benefits only producers in these sectors. Exclusion of strategic sectors from CFTA helps producers face less competition as the price of imported commodities will include tariffs. Protection of strategic sectors will also increase government revenue. The impact of protecting strategic sectors on the overall economy, however, is negative, which is it results in a decrease in GDP.
The Nexuses between Tax Revenue, Inflation, Private Final Consumption and Economic Growth in Ethiopia
(Addis Ababa University, 2016-06) Handamo, Firehiywot; Guta, Fantu (PhD)
The study aims at understanding the nexus between tax revenue, private final consumption, inflation and economic growth in Ethiopia. To achieve this objective co-integrated VAR approach was employed. The estimated models enable to understand the long run and short run relationship of the variables for the period 1970–2015 in Ethiopia. The study have the following major findings: First, Real GDP exert negative and significant effect on real tax revenue in the long run while the impact of the real private final consumption is positive and insignificant in the long run. Second, there is a strong evidence that inflation exert negative impact on real tax revenue. Third, there is evidence of bi-directional causality between real tax revenue, inflation, real private final consumption and real GDP. Fifth, the impulse response function indicates that the variables are at fast movement towards long run time path. The overall findings of the study underlined given the long run negative impact of RGDP on real tax revenue, it will be natural to think of different reforms. Here, Inferences drawn will have implications for all stakeholders in the economy and are particularly useful for fiscal policy makers of the country.
Determinants of Private Saving in Ethiopia
(Addis Ababa University, 2016-06) Wodamo, Ayele; Mekonnen, Alemu (PhD)
Saving is an important instrument to enhance economic growth by providing sufficient funds for investors. However, empirical literature that relates to mobilizing savings in Ethiopia is in broad aggregate forms and almost no work is conducted on determinants of private savings in Ethiopia. For this reason this study empirically investigates the determinants of private saving in Ethiopia by using annual data over the period 1980-2015. Accordingly to identify the factors that affect private savings in Ethiopia the researcher employs ordinary least squaresand error correction models fitted for time series data. The variables examined are real gross domestic product, inflation, government fiscal balance, real deposit rates, current account deficit and financial development indicators. The results indicate that private saving in Ethiopia is a response for variables, real gross domestic product, government fiscal balances, real deposit rate and financial developments but it is not responsive to inflation and current account deficit in the long run. In addition to this granger causality tests indicate that economic growth causes privates savings in Ethiopia which is in line with Keynesian theory, that it is higher economic growth that leads to higher saving.Finally, the study recommends that policy makers or government work to improve income levels of society to address adverse effects on private saving. Likewise the study suggests that fiscal policy should be designed and implemented in a prudent way such that it cannot lead to crowding out private saving
The Economy Wide Impact of the Devaluation of Ethiopian Currency: A Recursive Dynamic Computable General Equilibrium Approach
(Addis Ababa University, 2018-06) Aklilu, Abebe; Zerayehu, Sime (PhD)
In recent times, Ethiopia has experienced far-reaching economic growth and development changes. Despite this growth, the country has been chronically running a trade deficit. Devaluation is one of the most important but controversial trade policies recommended by the IMF for most of the developing countries in restoring the trade balance and increasing real GDP growth. To this end, this study analyzes the economy-wide impact of the devaluation of Ethiopian currency (birr) using Dynamic Computable General Equilibrium (DCGE) Model. The model used an updated version of 2009/10 Ethiopian SAM developed by Ethiopian Development Research Institute (EDRI). Three different simulation scenarios have been simultaneously used to evaluate the real impact of devaluation on the economy; 15%, 25% and 35% increase in exchange rate respectively. The findings of the study reveal that devaluation results in a decline in the overall GDP growth and domestic absorption. On the other hand, the trade balance has been improved under all simulation scenarios. Moreover, the productions of agriculture and service sectors expand whereas that of the industrial sector shrinks at a higher rate. By and large, real consumption, fixed investment, GDP, government revenue and household welfare are all adversely affected justifying that devaluation has contractionary effects on the Ethiopian economy. Based on the findings, the researcher suggests the monetary authority to stick to its managed floating policy stance and make changes in cautious and predictable manner. Moreover, there is an obvious need to combine monetary policy measures with fiscal policy in order to promote sustained economic development.
Economy-Wide Impacts of Export Price Changes in Ethiopia: A Recursive Dynamic Commutable General Equilibrium Analysis
(Addis Ababa University, 2018-10) Endalkachew, Kabtamu; Sisay, Regassa (PhD)
Ethiopia’s export is largely dominated by primary commodities characterized by a high degree of price variability. Therefore, this study investigated the economy-wide impacts of export price changes using Recursive Dynamic Computable General Equilibrium model calibrated through 2009/10 Social Accounting Matrix of Ethiopia, developed by International Food and Poverty Research Institute in collaboration with Ethiopia Development Research Institute and University of Sussex. The study reveals increase in export price appreciates domestic currency, rises import demand, but reduces export demand together that worsens Ethiopia trade balance. The increase in export price also weakens investment demand, government income and saving, the overall and sectoral economic growth. It also rises factors return and household income and welfare. Conversely, decrease in export price depreciates domestic currency, which lead to low import, but, high export demand, which in turn leads to improved trade balance. It also increases investment demand, government income and saving, and the overall economic growth. However, decrease in export price results low factors return, household income and welfare. To reduce the negative impacts of export price changes in the overall economy, it is recommended that: a) the exchange rate policy of the country should managed-floating type, b) diversification and industrialization of export sector through integrating commodity policies into the country overall development strategy, and c) harness the income gains from commodity prices to facilitate wider-economic transformations and reduction of dependence on primary commodities export.

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