Impact of foreign direct investment on economic growth of. This article is an attempt to bring out the nittygritty of china ethiopia bilateral trade ties with reference to the economic capacity of the two countries, the challenges of trade balance, a nd applicable trade regimesrules and regula. The most important forces behind food inflation in the long run are real income, money. Accordingly, devaluation initially deteriorates trade balance before starting a stage of improvement and heading towards equilibrium in the long run and thus trade balance follows a j. The results show evidence of an equilibrium longrun relationship cointegration. Determinants of trade balance in ethiopia ethiopia like other developing countries is highly dependent up on earnings from the sales of primary commodities and concentrating on small range of export commodities and market outlays to finance much needed capital goods imported. The objective of this study is to examine the determinants of export trade in ethiopia. The real effective exchange rate reer is an important determinant of measuring the global competitiveness of a country and, therefore, has a strong influence on export earnings, improvements in balance of payments and long term growth soutar and santoya 2011. This page provides ethiopia balance of trade actual values, historical. The findings of the study suggest that the most important long run determinants of trade balance are household consumption expenditure, real effective exchange rate and terms of trade while government consumption expenditure, house hold consumption expenditure, real effective exchange rate and terms of trade are. In 2017, ethiopias trade deficit amounted to around 12.
Currency devaluation and economic growth the case of. Determinants of international tourism1 prepared by alexander culiuc authorized for distribution by athanasios arvanitis may 2014 abstract the paper estimates the impact of macroeconomic supply and demandside determinants of tourism, one of the largest components of services exports globally, and the backbone of many smaller economies. This model, which focuses on the real exchange rate and other real variables, embodies the essential ideas of the elasticities and absorption approaches to the balance of payments and the traditional partial equilibrium model of the foreign exchange market. The apparent shift in exchange rate policy to boost export performance and promotes surplus trade balance raises the question of what strategy the government will now follow to maintain macroeconomic stability. Ethiopia has tried different trade strategies in the past, the perennial goal being to diversify its. No significant effect of crude oil prices can be observed on trade balance. This study examines the impact of trade liberalization on the ethiopia s trade balance using the data over the period 1974 to 2009 from nbe nationalbank of ethiopia.
The paper uses ordinary least square ols technique to see the impact of determinants on profitability of ethiopian commercial banks. Determinants of trade balance in ethiopia zewudie tij. The study applied balanced panel data of eight ethiopian commercial banks that covers the period of 2002 2012. Analysis on the determinants of trade balance in ethiopia a time series analysis 19812017 trade balance is one core component of gross domestic products of countries especially in the present times in which every nation have liberalization of their economies. Ethiopia runs consistent trade balance deficits due to lower production of exportable goods and logistic difficulties. Evidence from panel study eyayu tesfaye senior lecturer, college of business and economics, department of economics, addis ababa university, addis ababa, ethiopia abstract despite the critical importance of agriculture in ssa countries. This article examines the shortrun and longrun relationships of trade balance with the explanatory variables such as income, money supply, real exchange rate, budget balance and foreign income in ethiopia.
Determinants of ethiopian trade performance to its bordering. The country has undertaken serious trade reforms, either as a part of major macroeconomic reforms and commitments with international regulations, or by decisions driven by a process of internal adjustment for the last two decades. The international role of the dollar and trade balance. As a result, the fall in foreign spending on the country. Favorable trade balance is a major determinant of growth in any country, as surplus increases gdp and deficit reduces it. Determinants of agricultural export in sub saharan africa. Pooled ordinary least square p ols, fixed effects f e and random effects. This paper evaluates the current state of the literature concerning the effects of exchange rate movements on trade balance. Determinants and potentials of foreign trade in ethiopia.
However, this research focused on finding the main determinants and impediments of fdi inflows to ethiopia using a survey of foreign firms based in ethiopia. The study focuses on the analysis of the main determinants that have an impact on trade balance. Determinants of current account balance in ethiopia aauetd. Ethiopia total exports trade to the bordering region is also affected by the gdp of. This study examines the impact of trade liberalization on the ethiopia s trade balance using the data over the period 1974 to 2009 from nbe national bank of ethiopia. Birr devaluation and its effect on trade balance of ethiopia.
It in particular examines how fdi affects gdp growth, both directly and also conditioning on trade liberalization that ethiopia adopted in early 1990s. Determinants of agricultural export in subsaharan africa. This indicates that the proportion between export and import is always less than one. This paper measures the impact of foreign direct investment fdi on economic growth in ethiopia based on annual time series data over the period 1974 to 2011. A positive trade balance signifies a trade surplus, while a negative value signifies a trade deficit. The impact of trade liberalization on the ethiopias trade. Moreover, the result from the long and short run models showed that real effective exchange rate, money supply, domestic real income and term of trade are the major determinants of the trade balance of ethiopia both in the short and long run. Annex ix contains trade balance of ethiopia with major trading partners. The determinants of agricultural productivity and rural household income in ethiopia tessema urgessa1 abstract this paper aims at investigating the determinants of agricultural productivity and rural household income in ethiopia. To briefly look at exchange rate regimes and developments in ethiopia. In other words, trade balance will deteriorate if individuals of the economy purchase more foreign goods, hence causing a rise in imports relative to exports. Both johansens and autoregressive distributed lag approach are respectively used giving similar longrun estimates showing that real. The impact of the real effective exchange rate on real. Analysis on the determinants of trade balance in ethiopia.
A panel data analysis of foreign trade determinants of nepal. Trade and foreign direct investment fdi figure in the new plan but less reliance is placed on fdi inflows than in the past and as much emphasis appears to be placed on import substitution as on export expansion to reduce the trade deficit. The effect of exchange rate movements on trade balance. In this paper investigation on the major determinants of trade export, import and total trade will have been made. A panel data analysis of foreign trade determinants of. The last two annexes annex x and xi contain data for the year 2006 on the major export and import items of the country with description of the items, destination or origin, fob value in birr in the case of exports and cif value in the case of imports. The findings of the study suggest that the determinants of inflation differ between sectors food and nonfood and the time horizons under consideration. This study tries to identify the main determinants of the trade balance in ethiopia from 19812017 by considering ratio of export and import as an approximation. Poor performance and volatility in export earnings, and ever increasing. Analysis on the determinants of trade balance in ethiopia a time. Accordingly, devaluation initially deteriorates trade balance before starting a stage of improvement and heading towards equilibrium in the long run and thus trade balance follows a j curve time path.
This study attempted to indentify the short and longrun determinants of trade balance in the case of ethiopias economy for the period 1978 to 2009. Furthermore ismail, 2012 analyzed a dynamic panel data analysis on the determinants of trade balance of bangladesh for about 26 years with variables like real gdp, relative gni. Trade balance is the value of exported goods minus the value of imported goods. The impact of trade liberalization on the ethiopia s trade balance hailegiorgis biramo allaro candidate agricultural economics abstract. The country is a net importer of fuel, foodstuffs, technological products and textile apparel, which in aggregate result into a continuous trade balance deficit. Determinants and potentials of foreign trade in ethiopia munich. Furthermore, the study is devoted to compute the trade potential based on the estimated augmented gravity model. Determinants of export trade in econometric study with.
Determinants of trade balance in ethiopia zewudie tijs. This paper shows that exchange rate depreciation in serbia improves trade balance in the long run, while giving rise to a jcurve effect in the short run. Determinants of the terms of trade the terms of trade which is ultimately decided upon by the two trading farmers will depend on a variety of different and distinct factors. This article examines the shortrun and longrun relationships of trade balance with the explanatory variables such as income, money supply, real exchange rate, budget balance and. The findings of the study suggest that the most important long run determinants of trade balance are household consumption expenditure, real effective exchange rate and terms of trade while government consumption expenditure, house hold consumption expenditure, real effective exchange rate. This study investigates the determinants of trade balance in postliberalization ghana, covering the period 19842015. Unfortunately in pakistan, trade balance has never seen a surplus over the period of time. The current account deficit is usually shaped by foreign trade in goods and services. These results add to the already existent empirical evidence for a diverse set of other economies.
Birr devaluation and its effect on trade balance of. Specifically this study focus on the main cause of trade deficit in somalia by analyzing the impact of foreign direct investment fdi. Gravity model approach nrbwp 3 gravity model as determinant for import and trade balance as well. It expands the productive capacity of a nation and plays a crucial role in the economic growth and development process. This study tried to assess the main determinants of the trade balance of ethiopia by considering ratio of export and import as an approximation to trade balance. The general objective of this research is to scrutinize the impacts of changes in exchange rate movement on trade balance, i. The world financial crisis where the major importing countries decreased their import quota might have a negative. Highlights on the state of ethiopia s external trade and its growth implications ghiorgis tekie i. The statistic shows ethiopias trade balance from 2007 to 2017. If a country is subjected to free trade, it means that the country is having many benefits from this trade openness. An analysis of determinants of balance of trade in india.
In ethiopia s case, where price stability, economic growth and export. Introduction the ethiopian economy is linked to the economies of its trading partners in many aspects and to mention some its industries, service sectors, levels of income, employment, living standards and technology cannot be seen in isolation. Introduction investment is an act of current spending for expected future return. Based on the regression result with gravity model, the study finally recommends specific trade policies to increase net. The study shows that trade barriers continue to be of significance, as has been stressed in other studies, including those by unctad over the years. The country is a net importer of fuel, foodstuffs, technological products and textile apparel, which in aggregate result into a continuous trade balance deficit for a long period of time more than four decades. The determinants of agricultural productivity and rural. There are different factors which result into having as such circumstance. Analysis of the determinants of ethiopian trade balance.
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