Assessment on Real Effective Exchange Rate and External Sector Development of Ethiopia
Economics
Volume 4, Issue 4, August 2015, Pages: 64-70
Received: Jul. 13, 2015; Accepted: Jul. 21, 2015; Published: Aug. 13, 2015
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Author
Nega Muhabaw Kassie, National Bank of Ethiopia, Addis Ababa, Ethiopia
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Abstract
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
Keywords
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. doi: 10.11648/j.eco.20150404.12
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