Macroeconometric Policy Modelling for Ethiopia
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Date
2001-07
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A.A.U
Abstract
A sma!! macroxunonetnc model for Ethiopia is sper:ified, estimatH:i and tested using time series data for the
period 1965/66 -1998/99 Wih the objectiLe of examining tk eJfo::t of an inOT'tlse in inljXJ11:pnres and the
impaa of A IDS. 1he malel is set up in rp71!I'a/ equilibriton frtl111e1Wrk and individual equations in the
nKXid. are estimated in an ECM fonnat using tJx: Johansen approach in view of the time series properties of
tbe maoo·time series mriables. In ten11S of the individual equations and dynamicwilb·in·samfle sinUflation,
tJx fJeliOlmana! of the model is quite wdl.
T7W dyr1t011iJ: counle/foailal simulations are carried out 1he result of the simulation demonstrates that an
increase in import prUe has diverse impact on the ffXJr1011Y induding increase in the merall prUe lead, real
exc/xmlJ! rate deprociation, reduction in imports, deterioration in tenns of trade and sfa..ving dm.m of tlx
fX.U/7rmicgruutb. This result is ronsistentwilb the import mnpression argument raised in Ndulu (1991) and
Ratt;E (1994).
In addition, it can be discerned that the prewlentE of H!V/AIDS has a negatiu! impaa on the merall
fX.U/7arty througfJ lmwing the actite falxJur force The decline in the /alxJ~nIarr:e bas a dim ~ impaa
on lxJtI, tlx output of the agricultural and non·agricultural sector.; that 7.wuld lead to the foIL in priwte
consumption, inU!stment, exports and gm:emment tax rewnue. 1he slfJW dorm of the econ(my 7Wuld also be
strengt/xned wilb tlx fa/I in imports due to the drrline in exports and knee tbe shrinking doun of the
imfXJrting capacity.
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Keywords
Modelling For Ethiopia Macroeconometric