Abstract:
The objective of this study is to examine the determinants of export trade and its
dynamics in Ethiopia over the period 1972-2011. The estimation technique used is the
simultaneous equation framework with Three Stage Least Square approaches (3SLS).The
variables used as determinants of demand side are: the real effective exchange rate, real
income of trading partners and trade Opnnenes. On the other hand, the variables used as
determinants of export supply include: Gross domestic products, the ratio of price of
exports to domestic price, Infrastructure which is proxied by Telephone per 1000 people
and dummy variables used (since Ethiopia followed varying policy regimes). The data is
collected from NBE (2011), EEA Statistical data base CD-ROM (2012), IFS, WB and
MoFED. The estimated results indicated that real effective exchange rate and trade
openness significantly affect the export value of Ethiopia. However, Real income of
trading partners’ is insignificant. On the other hand, on the Supply side, gross domestic
product, infrastructure and policy dummy have positive and significant impacts on export
supply of Ethiopia. However, relative price (the ratio of price of exports to domestic
prices), is negatively related to the supply of export suggesting that some commodities
are diverted to the domestic market as their prices increase.
