Effect of Exchange Rate Volatility on Ethiopian Coffee Export
No Thumbnail Available
Date
2018-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
This study tried to evaluate the effect of exchange rate volatility on Ethiopian coffee export. It
has employed annual time series data (1980-2015) collected from the country’s different
institutions, namely: National Bank of Ethiopia (NBE), Ministry of Finance and economic
development (MOFED) and Ethiopian Custom Authority (ECA). The overall objective of the
study was to investigate the effect of exchange rate volatility on Ethiopian coffee export. Tools
of descriptive statistics were used to analyze the data and understand the dynamics of the
variables included in the analysis. A Bounds testing and Autoregressive Distributed Lag (ARDL)
model was used to establish the presence of a long run relationship between exchange rate
volatility and coffee export. In order to evaluating exchange rate volatility, the study employed
the standard deviation method.
The result of the study indicates that coffee export in Ethiopia has negative and significant
relationship with exchange rate volatility. Again Gross Domestic Product (GDP) and Terms of
Trade (TOT) have negative effect on coffee export. On the other hand, Trade openness and real
effective exchange rate were found to be positively related and significant. From these results,
the study recommended that policy makers in the country should try to maintain a well-managed
stable exchange rate regime. Also, the government could set up a coffee export stabilization fund
that would ensure a certain amount of predictability in coffee prices during export. The other
measures should be related with both export and destination diversification. Other agricultural
and industrial products and goods to be exported in addition to coffee to earn foreign currency
should be assessed. The other one is not only diversifying the export items, but also the
government needs to diversify export market destinations.
Description
A Thesis Submitted to the School of Graduate Studies of Addis Ababa
University in Partial Fulfillment of the Requirements for the Degree of
Masters of Science in Economics (International Economics)
Keywords
Coffee, Exchange rate volatility, Exports