The Determinants and Dynamics of Aggregate Merchandise Imports in Ethiopia
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Date
2005-06
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A.A.U
Abstract
Ethiopia imports goods and service s under serious foreign
exchange constraint. Export ",earnings finance less than
fifty percent of imports . For this reason there was excess
demand for foreign exchange in the past four decades . The
purpose of this study is therefore, to characterize the
behavior of demand and determinants of imports in Ethiopia .
The study used error correction and co integration as well
as descriptive analysis.
In the short run, one of the most important determinants of
aggregate merchandise imports in Ethiopia is found to be
foreign exchange availability in the form of international
foreign exchange reserves. Economic activity (real GDP) ,
the relative prices (in this study the real exchange rate)
have no significant influence in the short run. However,
all together with international reserves have significant
influence in the long run . The other important determinant
of imports both in the short and long run is trade policy
regime. Openness of the economy had given rise to magnified
and accelerated growth in imports.
One important implication drawn from the analysis is that
the need for export promotion and diversification measures
in order to fill the fast growing trade deficit.
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Keywords
Determinants and Dynamics of Aggregate, Merchandise imports in Ethiopia