The Effect of Export Earnings Fluctuation on Economic Growth in Ethiopia
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Date
2007-03
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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