Effects of Exchange Rate Volatility on Employment in Ethiopia: The Case of Manufacturing Sector.
No Thumbnail Available
Date
2022-06-04
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U.
Abstract
This study examines the effects of exchange rate volatility on manufacturing employment in Ethiopia for the period 1971-2020. Auto-regressive Distributed Lag (ARDL) model was applied for analysis. The study revealed that exchange rate volatility has a negative effect on manufacturing employment in Ethiopia. That means the instability of exchange rate against other foreign currency including US dollar significantly decreases the employment in manufacturing sector in Ethiopia. Similarly, lending interest rate has a negative relationship with manufacturing employment. Real gross domestic product, real private sector credit, inflation and export have a positive relationship with manufacturing employment in Ethiopia. The study recommends that concerned body have to be control the volatility of exchange rate by imposing restrictions on buying and/or sale of currencies. Also, creditors or financial sector should offer long term and low interest rate loans. And similarly, government should give incentive for manufacturing sector such as export incentives, supply low interest loans and provide assurance for high risk investments in order to expand their investment, to attract new capital investment and to inspire new job creation. Furthermore, the relationship between exchange rate volatility and employment will require extra study including the other major sectors of economy.
Exchange Rate Volatility, Auto-regressive Distributed Lag Model, Employment, Manufacturing, Bound Test, Ethiopia.