The Economy Wide Impact of Comesa FTA on Ethiopia: A Recursive Dynamic CGE Model
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Date
2011-06
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Addis Ababa University
Abstract
This study examines the economy wide impact of COMESA FTA on Ethiopia. The analysis is made based on Ethiopian social accounting matrix (SAM) of 2005/06 constructed by EDRI. The study has utilized a recursive dynamic CGE model. The model is simulated for an import tariff reduction on different sectors using three different scenarios.
The main findings of the analysis are: in the first scenario, removal of import tariff on agriculture and non agricultural sector results in an increase of consumption expenditure of households, commodity output and GDP. On the other hand, government revenue, price of import and price of export declined. Moreover, domestic activity has mixed outcomes. There is some trade creation but no trade diversion effects induced by the tariff reduction. .
Mean while, under the second scenario removal of import tariff on agriculture sector only has no impact on Ethiopian economy. Furthermore, the removal of import tariff from non agricultural sector in the third scenario is resulted in similar outcomes as that of the first scenario.
Key word: Recursive dynamic CGE model, COMESA FTA, import tariff reduction, Ethiopia.
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Keywords
Recursive dynamic CGE model, COMESA FTA, import tariff reduction, Ethiopia.