Determinants of Ethiopia's Bilateral and Potential Exports in the Emerging Countries: A Gravity Model Approach
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Date
2012-06
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A.A.U
Abstract
Exports are the drivers of economic growth in Ethiopia. Given their importance in the economy,
it is necessary to analyze factors that are determining export flows between Ethiopia and its
trading partners. A gravity model is very important in the analysis of bilateral trade flows, and
has proven to be a useful 1001 in determining trade or export potential of a country. The purpose
oj this study is to investigate factors that determine exports of Ethiopia using a gravity model
approach. The analysis indicates that increases in importer's GDP and Ethiopian's GDP cause
exports to increase, while distance is associated with a decrease in exports. Real exchange rates
do not have an impact on export. Ethiopia doesn't export more to countries where it shares a
common border. The study shows that there is unexploited export potential to among others,
China, India and Brazil. These results are important for trade policy formulation in order ensure
that Ethiopia's export potential is exploited in order to enhance economic growth.
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Keywords
Ethiopia's Bilateral, Potential Exports