The Effect of Real Exchange Rate on the Trade Balance of Ethiopia: Does Marshall Lerner Condition Holds? Evidence from (VECM) Analysis
| dc.contributor.advisor | Girma, Estiphanos (PhD) | |
| dc.contributor.author | Debela, Gelana | |
| dc.date.accessioned | 2019-10-22T14:58:45Z | |
| dc.date.accessioned | 2023-11-04T10:28:11Z | |
| dc.date.available | 2019-10-22T14:58:45Z | |
| dc.date.available | 2023-11-04T10:28:11Z | |
| dc.date.issued | 2019-06 | |
| dc.description.abstract | This paper attempts to investigate the empirical investigation of the effect of real exchange rate on the trade balance of Ethiopia and whether the Marshall Lerner condition holds using vector error correction (VECM) co-integration method using quarterly data from 1995Q1 to 2017Q4. To make appropriate analysis, the study has used the Granger causality test, impulse response function and variance decomposition method in the short run whilst the vector error correction model (VECM) has undertaken to estimate the long run causality whether real exchange rate improves or worsen trade balance. The study included other control variables like domestic and foreign income and real money supply in addition to real exchange rate. The empirical results thus, indicated a long run significant relationship between trade balance and its determinants; real exchange rate, domestic income, foreign income, and real money supply as incorporated in the model specification of the study. The result of the impulse response function as well indicated that there is no evidence of J-curve in Ethiopia. The study concludes with important implications for policymakers because it provides evidence supporting the fact that the real exchange rate has a major impact on trade balance adjustment and that devaluation of real effective exchange rate worsens the trade balance of Ethiopia even in the long run. | en_US |
| dc.identifier.uri | http://etd.aau.edu.et/handle/123456789/19600 | |
| dc.language.iso | en_US | en_US |
| dc.publisher | Addis Ababa University | en_US |
| dc.subject | Ethiopia | en_US |
| dc.subject | Exchange rate | en_US |
| dc.subject | Trade balance | en_US |
| dc.title | The Effect of Real Exchange Rate on the Trade Balance of Ethiopia: Does Marshall Lerner Condition Holds? Evidence from (VECM) Analysis | en_US |
| dc.type | Thesis | en_US |