Modeling the Principal Export Commodities of Ethiopia (1970/71 - 2003/04)

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Date

2006-07

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A.A.U

Abstract

This study endeavored to model the principal export commodities of Ethiopia such as Coffee Oilseeds. Khat. Pulses. Hides and Skins, Other exports and manufactured exports using time series data/form 1970/ 71-2003/04. Since Ethiopia is price taker in the international commodity market, emphasis is made to the supply side of the model. In addition, as the sample size we employed is not sufficient to undertake the Johansen multivariate estimation technique, the short run and the long run parameters are estimated using Engle- Granger error correction method. The estimated models exhibited that export sector performance is highly vulnerable to . Environmental shacks like rain/all in both short run and long run equations. The external shocks such as terms of trade deterioration has also been scrutinized to be the fundamental factor in determining the real principal commodity exports of Ethiopia in both short run and long run equations. Similarly the real elective exchange rate index (REER) has been important variable in most of the equations. Real intermediate imports which is comprised of raw materials, semi finished goods and capital goods has been also found to be key factor for real manufactured exports which is highly import intensive with 87 percent of raw material demands meet from imports. on the other hand. the variable representing the influence of the road network on export supply (TRL) has the expected sign for all the commodities although it is significant only Jar Chat, Hides Skins and Oilseeds exports. Negative relationship between real exports of coffee and real exports o/Hides and skins has been observed with the exchange rate gap disclosing that when the gap widens export supplies of these commodities will be slumped. Errors and omission, fertilizer sold. domestic consumption, real agricultural production, international trade loan for export are vital variables in determining real export of commodities. The repercussion of these results is the importance of diversifying the export sector both geographically and commodity wise. The commodity diversification should be also embarked on both horizontally and vertically. The Importance real effective exchange rate calls lip also the real depreciation the Birr is imperative for competitiveness of all commodities that Ethiopia is exporting for the interactional markets.

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Export Commodities

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