The Structure and Behaviour of Import Demand in Ethiopia
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Date
2000-02
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A.A.U
Abstract
This study attempts to illvestigate the structure alld behavior of import demand ill
Ethiopia. To do this both descriptive analysis ami all error Correction Model( EO'vf) are
utilized.
The res liltS drawn from the applied Eclectic mode!, siIOW thai the price elasticity of the
demandfor import, though large for some import categories ill the 10llg -/'Un [-1.23 alld
-1.8 for fuel, and mallufacturing, respectivel)] is cOllsiderably small, and is statistically
insignificant both in the short and long-rul/.
The income elasticity of demalld for sOllie categories of imports ( Fuel, MTE and FB T) is
found to be insignificant. On the other hand, all categories of import demalld were fOlilld
to be strongly responsive to foreign exchallge availability. Another important point
observer/from aggregate import demand model is the positive time coefficient.
The 11011- significant relative prices alld real ill cOllie elasticities suggest that devaluatioll
alld stabilization policies lIlay IIOt improve tile balallce of payments positioll of the
cOlllltry. Moreover, the positive time coefficiellt implies deepelling import dependency of
the economy as a whole. In general, the results suggest that policies that directly broaden
export base, increase export eamings(supply side) alld access to extemal capital inflows
are likely to have a cOllsiderable impact 011 imports than those which concelltrate
exclusively Oil aggregate demand and exchange rate management.
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Keywords
Behaviour of Import Demand in Ethiopia