Macroeconomic Determinants of Textile and Garment Export Performance in Ethiopia (A Time-series Analysis)
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Date
2020-03
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Abstract
Since the beginning of the twenty-first century, textile and garment retailers of the developed countries have started to source globally instead of manufacturing products domestically to reduce costs and become more competitive in textile and apparel markets. Agriculture is a primary source of income (50 per cent of the GDP) for Ethiopia; but in recent years the government is focusing on industrialization and new sectors. Textile and garment being one of the sectors received a lot of attention the government with an objective of becoming the major sourcing destinations in the world. Ethiopian textile export has shown a significant increment from 2010 to 2018 and decreased in 2019 by 16 percent. The main objective of this study was to identify the macroeconomic determinants of textile and garment export performance in Ethiopia using time series data from 1982 to 2019. The research framework in this study was built on international trade theories and global value chain framework. Auto-regressive distribution lag (ARDL) model has been employed to analyze the long run and short run relationship between variables and test the developed hypothesis. The stability of the data was checked and all the data was found to be stationary by differencing; besides all the CLRM assumptions were tested. Accordingly, the result of the regression model revealed that foreign direct investment, trade openness, labor-capital and Domestic infrastructure have significant positive impact on textile export, whereas inflation has a significant negative effect. Exchange rate has a negative relationship with textile export in the long-run but has a positive relationship in the short-run. This study demonstrated that attracting foreign direct investment, reducing trade related bureaucracy, maintaining economic stability and improving infrastructure can lead to increase in textile export performance; furthermore the country’s labor-capital may be a comparative advantage for attracting investors. This study tries to make an important step towards understanding the determinants of textile and garment export performance, and aids in building a research model of determinants for textile and garment export performance in Ethiopia.
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A thesis submitted to Addis Ababa university school of business and economics, department of business administration for partial fulfillment of the requirements for the degree of master’s in business administration
Keywords
Export, labor, FDI, Exchange rate, textile and garment