Assessment on Real Effective Exchange Rate and External Sector Development of Ethiopia
Volume 4, Issue 4, August 2015, Pages: 64-70
Received: Jul. 13, 2015;
Accepted: Jul. 21, 2015;
Published: Aug. 13, 2015
Views 4669 Downloads 162
Nega Muhabaw Kassie, National Bank of Ethiopia, Addis Ababa, Ethiopia
Follow on us
This paper tried to assess the movement of real effective exchange rate and external sector development such as export, import & trade balance of Ethiopia using descriptive analysis to incorporate the two major devaluation period from the year 1985/86 to 2012/13. The result revealed that the depreciation of the real effective exchange rate improves the export performance however it doesn’t discourage our import. A result even if there is higher growth of export after a depreciation of the real effective exchange rate, since the growth rate of imports outweigh, there is no improvement in the trade balance account. Thus, the paper recommends among others, Promoting import substitution strategy through subsidies to the domestic industries and reducing taxes to their imported semi finished inputs and awareness creation in favor of the home Produced substitutes should be made to reduce import expense
Real Effective Exchange Rate, Import, Export, Trade Balance
To cite this article
Nega Muhabaw Kassie,
Assessment on Real Effective Exchange Rate and External Sector Development of Ethiopia, Economics.
Vol. 4, No. 4,
2015, pp. 64-70.
Abbes Hiri(2014),“The Real Effective Exchange Rate Misalignment: Application of Behavioral Equilibrium Exchange Rate BEER to Algeria 19802009”,International Journal of Economics, Finance and Management Sciences.
Bahmani-Oskooee, M. and J. Alse. (1994), “Short-Run versus Long-Run Effects of Devaluation: Error Correction Modeling and Cointegration,” Eastern Economic Journal, 20, 453–464.
Deresse Degefa (2001), “Export Performance and Economic Growth In Ethiopia”.
Dessalegn Lencho (2013), “The Effect Of Exchange Rate Movement On Trade Balance In Ethiopia”.
Edwards (1991), “Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policies in Developing Countries”, Cambridge, Mass: MIT Press.
Equar (2001), “Determinants of Trade Balance in Ethiopia”.
Golub, S.( 2000), “South Africa’s international cost competitiveness”.
Jean-Louis Combes, TidianeKinda, and Patrick Plane (2010), “Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate” IMF Working Paper.
Menasbo Gebru (2012), “The Effect of Currency Devaluation on the Ethiopian Economy’s Trade Balance: A Time Serious Analysis” International Journal of Research in Commerce & Management.
Yibeltal et .al (2015), “Modelling and Forecasting the Balance of Trade in Ethiopia”, American Journal of Theoretical and Applied Statistics.