Evaluation of Ethiopia's Bilateral and Potential Exports in the Middle East: A Gravity Model Approach
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Date
2009-06
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A.A.U
Abstract
The study analysis the major determinants of Ethiopian's bilateral exports and explores
the unexploited export potentials that the country may have in the Middle East using two
different methods.
First, the augmented gravity model estimated by G2SLS estimation technique using 13
years data of 15 exporting partners. The estimated coefficients then used to analyze the
existing bilateral export and predict the export potential that the country could have in
the three Middle Eastern countries. Accordingly, GDPpc of both exporting and importing
countries found to have positive and significant impact on Ethiopia's bilateral exports
whereas, distance between countries negatively affect their bilateral trade. In this light,
the export potentials of the country are estimated using the estimated coefficients of the
gravity model. Accordingly, Ethiopia has the highest unexploited potential in UA. E and
significant amount in Saudi Arabia.
Secondly, Using the lTC measure, the potential to increase Ethiopian's export in these
countries and the top 20 commodities that highly contribute to increase the county's
export potential are also identified. The finding of this index shows that gold, coffee and
tea, fruits and vegetables, live animals, meat and meat preparations and cut flowers are
among the products that have the highest potentials to increase Ethiopia's Export in the
Middle East.
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Keywords
Gravity Model, Export Potentials