The Effect of Export Earnings Fluctuation on Economic Growth in Ethiopia

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Date

2007-03

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Publisher

A.A.U

Abstract

The study tries to examine the relationship between export earnings fluctuation and economic growth in Ethiopia using a time series data of the last four decades. The study is based on the general production function in which exports enter as one of the inputs in the production process. Empirical research on the relationship between growth and exports has shown mixed results (positive and negative). After splitting the actual export earnings in to stable and unstable components using a five years moving average, the instability of export earnings is found to have a negative effect on economic growth, while the stable component has a positive relation with economic growth. Moreover, the study tries to show that expansion of exports has a vital effect to economic growth and that growth of exports stimulates growth of non-exports. Exports affect economic growth not only directly but also indirectly by enhancing productivity of other inputs in the non-export sector. In addition the study tries to evaluate the performance of the Ethiopian export sector using different indicators, each of which is believed to highly contribute to instability earnings from the sector. The results show that the export sector of the country has underperformed in the period considered

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Keywords

Export Earnings, Economic Growth

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