Intraregional and Interregional Price Transmission in Ethiopia’s Staple Food Market: Evidence from Asymmetric Vector Error Correction Modeling

This study is undertaken to find out the presence short and long run relationship among producer and consumer prices and analyze the asymmetric nature of price transmission in staple food cereals namely: Teff, Wheat, and Maize in Ethiopia.  Twenty years monthly producer and consumer price data were used in the analysis. Central Statistical Agency of Ethiopia was the primary sources of the data and it was collected from representative zones of three regional states and one city administrations of the country. Results from Asymmetric Vector Error correction model revealed that there are both short and long run two way price transmissions in consumer and producer prices.  It is proved that there is asymmetric price transmission from consumer to producer in all sampled regions. But the speed and magnitude in producer price is much pronounced than the consumer prices that supports upward stickiness of producer prices because of asymmetric price transmission. The implication is that price shock in one region affects another region regardless of their differences. Therefore, price stabilization policies during time of disaster and food shortage in different regions need to consider unaffected regions in the country.  More importantly, producers are found to be victims of price decreases but not beneficiaries of an increasing price. Therefore, an intervention trough availing market information instantly helps to prevent upward stickiness of producer prices in agricultural products. Keywords: Price transmission, Staple food, agricultur

Evaluation of Effect of Exchange Rate Variability on Export of Ethiopia’s Agricultural Product: Case of Oilseeds

This research was carried out to find out the effect of exchange rate variability on export of oilseeds. It has employed annual time series data (1992-2010) collected from the country’s different institutions, namely: National Bank of Ethiopia (NBE), Central Statistical Agency of Ethiopia (CSA), and Ethiopian Custom Authority (ECA). Tools of descriptive statistics were used to analyze the data and understand the dynamics of the variables included in the analysis. Autoregressive Distributive Lag (ARDL) with Wald test was used to test the hypothesis that ‘there is no short run and long run relationship between export oilseeds and explanatory variables included in the model’. The result revealed that export oilseeds have negative relationship with exchange rate variability. Terms of Trade (TOT) was found to be negative and significant. Gross Domestic Product (GDP) is found to be insignificant; implying contribution of oilseeds to the export basket of the country is decreasing. Moreover, the underlined hypothesis was rejected confirming that there is a long run relationship between export and oilseeds and explanatory variables included. Export diversification and value addition are of possible solutions the country should focus on to improve the ever decreasing terms of trade and extract the gain from policy changes. Key Words: Exchange rate variability, Devaluation, Export, Oilseeds, ARDL and Wald tes

Impact of Enset Participation in Value Chain on Smallholder Household Food Security and Income in Southwestern Ethiopia

Growing demand for enset means that rural smallholder farmers have excellent potential to respond on the supply side, particularly in Southern Ethiopia. Evidence is required to determine whether or not smallholder farmers participate in these new market opportunities and whether they gain anything from doing so. This study examines the effects of smallholder farmers' involvement in the Enset participation in value chain on food security and income (as determined by crop income and daily caloric intake in the Gedeo zone of Southern Ethiopia). The investigation analyzed cross-sectional data from 380 randomly chosen smallholder farmers. Impact evaluation employed the Endogenous Switching Regression (ESR) model, which takes selection bias into account. Results from the ESR demonstrate how market, institutional, socioeconomic, and demographic factors influence the decision to participate as well as the food security and income of farm households. Overall, Enset market involvement has a favorable and considerable effect on the food security and income of rural farmers, with a significant difference between groups. The improvement of household food security and income depends on policies that lower the transaction costs of accessing markets, promote trees through various media, work to build the capacity of rural institutions, encourage and support Enset associations, design appropriate support from various stakeholders, encourage market linkages among various market players, and give farmers the opportunity to enroll in basic education

Agricultural Transformation Performance and Inter-Sectoral Linkages in Ethiopia

The motivation for agricultural transformation is basically linked with structural relationships among sectors of the economy; transforming one sector cannot be successful without the corresponding transformation of the other. Therefore, this study assessed the performance of agricultural transformation and analyzed the linkage between agricultural and other sectors of the economy in Ethiopia using time-series data retrieved from the World Bank (WB) and FAOSTAT databases (1981-2019). The study employed trend analysis and the Vector Error Correction Model (VECM) which incorporated inter-sectoral linkages in the Ethiopian economy. In the trend analysis, though positive changes have been observed, agricultural transformation did not achieve the intended outcomes in terms of sustainability, productivity technical change, food self-sufficiency, and expansion of agro-industries, which calls government attention to a swift shift to market-oriented commercial farming involving mechanization. The model result illustrates how the linkages across different sectors vary in the short-run and long-run. In the short-run, the industrial sector has a negative effect on the performance of the agricultural sector, whereas the agricultural sector in turn affects the value added in the industrial sector positively. In the longrun, there was exhibited a positive and significant linkage between industrial and agricultural sectors. Thus, it needs to strengthen the effective use and adoption of new agricultural technologies in Ethiopia due to the existing negative short-run agriculture-industry relationship. The macroeconomic policy should also take into account the possible long-run interdependencies between agriculture and other sectors of the economy by giving emphasis to the problem of transferring resources from agriculture to other sectors and vice versa

Agricultural Transformation Performance and Inter-Sectoral Linkages in Ethiopia

The motivation for agricultural transformation is basically linked with structural relationships among sectors of the economy; transforming one sector cannot be successful without the corresponding transformation of the other. Therefore, this study assessed the performance of agricultural transformation and analyzed the linkage between agricultural and other sectors of the economy in Ethiopia using time-series data retrieved from the World Bank (WB) and FAOSTAT databases (1981-2019). The study employed trend analysis and the Vector Error Correction Model (VECM) which incorporated inter-sectoral linkages in the Ethiopian economy. In the trend analysis, though positive changes have been observed, agricultural transformation did not achieve the intended outcomes in terms of sustainability, productivity technical change, food self-sufficiency, and expansion of agro-industries, which calls government attention to a swift shift to market-oriented commercial farming involving mechanization. The model result illustrates how the linkages across different sectors vary in the short-run and long-run. In the short-run, the industrial sector has a negative effect on the performance of the agricultural sector, whereas the agricultural sector in turn affects the value added in the industrial sector positively. In the longrun, there was exhibited a positive and significant linkage between industrial and agricultural sectors. Thus, it needs to strengthen the effective use and adoption of new agricultural technologies in Ethiopia due to the existing negative short-run agriculture-industry relationship. The macroeconomic policy should also take into account the possible long-run interdependencies between agriculture and other sectors of the economy by giving emphasis to the problem of transferring resources from agriculture to other sectors and vice versa

Determinants of bilateral trade flow between Ethiopia and its major trading partners: A gravity model approach

This study seeks to identify the internal and external factors determining Ethiopia’s bilateral exports and total trade flows. It uses panel data covering 21 major trading partners of Ethiopia from 2000 to 2017 and estimates an augmented fixed effects gravity model. The results reveal that domestic and foreign revenues increase Ethiopia’s bilateral exports, whereas the country’s foreign direct investment and the population size of the trading partners decrease bilateral exports. The results further show that both the domestic and foreign income and similarity endowment of Ethiopia increase the country’s total trade. The study provides recommendations for the effective implementation of supply side policies to enhance trade

Evaluation of Effect of Exchange Rate Variability on Export of Ethiopia’s Agricultural Product: Case of Oilseeds

This research was carried out to find out the effect of exchange rate variability on export of oilseeds. It has employed annual time series data (1992-2010) collected from the country’s different institutions, namely: National Bank of Ethiopia (NBE), Central Statistical Agency of Ethiopia (CSA), and Ethiopian Custom Authority (ECA). Tools of descriptive statistics were used to analyze the data and understand the dynamics of the variables included in the analysis. Autoregressive Distributive Lag (ARDL) with Wald test was used to test the hypothesis that ‘there is no short run and long run relationship between export oilseeds and explanatory variables included in the model’. The result revealed that export oilseeds have negative relationship with exchange rate variability. Terms of Trade (TOT) was found to be negative and significant. Gross Domestic Product (GDP) is found to be insignificant; implying contribution of oilseeds to the export basket of the country is decreasing. Moreover, the underlined hypothesis was rejected confirming that there is a long run relationship between export and oilseeds and explanatory variables included. Export diversification and value addition are of possible solutions the country should focus on to improve the ever decreasing terms of trade and extract the gain from policy changes

Household Saving Behavior in Rural Ethiopia: Challenges and Policy Options

Despite remarkable progress in increasing domestic saving over the last two decades, it has been unable to keep pace with investment rates. Hence, it is crucial to identify and implement feasible policies to mobilize more domestic savings to reduce the financial gap. To this end, dependable empirical evidence is imperative. This study aims to identify the major drivers of saving in general, and in-cash and in-kind savings in particular among rural households. We rely on both primary (panel data sets, key informant interviews, and focus group discussions) and secondary (data collected from Micro Finance Institutions (MFIs) and the National Bank of Ethiopia) sources. Descriptive and econometric approaches were employed to analyze the data and answer the research questions posed. The results show that about 75% and 77% of surveyed households saved in formal or informal financial institutions in 2014 and 2022, respectively. Nominal savings per household have increased in the past decade, but most of the improvement has come from in-kind savings which are destined for informal mechanisms. As a result, the main source of finance for rural households, MFIs, faced difficulty meeting the loan demands with their own savings. The rise in inflation, especially in recent years, forced households to reduce cash savings and hold assets. Our econometric analysis shows that ensuring access to formal financial services, financial knowledge, and building trust in formal financial institutions (FFIs) and their services significantly increases cash saving. Therefore, improving access to FFIs and diversifying financial products will improve the rate of savings and therefore, the rate of investment in Ethiopia. The results also show that building trust in the services and products of formal financial institutions (FFIs) can help bring in-kind savings and informal cash savings to formal cash deposits in financial institutions

Analyzing gender gap in agricultural productivity: Evidence from Ethiopia

Women make up more than 50% of the agricultural labor force but contribute less than 30% to agricultural productivity. Agriculture is the main source of livelihood in Ethiopia but by contributes more than 35% to GDP, 90% to forex earnings, and 70% to employment sources. So Improving economic well-being ensuring sustainable development, and reducing poverty is impossible by ignoring the role of women. Consequently, the main objective of the study is to investigate the gender gap in agricultural productivity using national Panel data of 3474 households which were collected in 2017 and 2019 by the Policy Studies Institute for AGP II baseline study and midline evaluation. Among these, 69% (2404) were male-headed and 31% (1070) were female-headed households. The panel data were combined with DID, Oaxaca Decomposition, and the Random effect Tobit model to investigate the gender gap. The result from the DID Method of Impact Evaluation shows that female-headed households were less productive by 3.7% and 2.05 quintals per hectare when measured in terms of value in birr and quintals per hectare compared to male-headed households. In contrast, male-headed households were more productive by 4% and 2.05 quintals compared to female-headed households. Additionally, the results from the pooled and random effect Tobit model showed that soil fertility, sex of the household head, slope of the land, total livestock holding in TLU, extension contact, use of inorganic fertilizer, credit use, machinery use, and plantation method are among the determinants of the gender gap in agricultural productivity. Furthermore, results from the Oaxaca decomposition show that a gender productivity difference between male and female-headed households was roughly 11.2% when measured by value and 5% when measured by an area-weighted formula. The main finding of the study is that endowment effects were less likely to have a significant impact on the productivity gap than structural effects did. Differences in the unexplained characteristics of men and women may also contribute to the considerable productivity gap between male-headed and female-headed households. Therefore, working on women's empowerment to improve their structural disadvantages through various training programs that favor women or gender-mainstreamed extension training programs for lowering gender productivity differentials is a possible policy option

Impact of rural out-migration on poverty of households in southern Ethiopia

AbstractThis study examined the impact of rural out-migration on the poverty of migrant-sending households by applying the new economics labor migration theory as a theoretical framework, and the multinomial endogenous switching regression as an analytical model in southern Ethiopia. Data were gathered from 415 sample rural households using stratified random sampling in the year 2021. The cost of basic needs approach and the Foster, Greer, and Thorbecke (FGT) method were used to establish the poverty line and create the poverty indices, respectively. The average annual food and non-food poverty lines are Birr 8997.52 and 2249.38 per adult equivalent. The incidence, depth, and severity of general poverty are 39.76, 10.11, and 3.55%, respectively, while the incidence, depth, and severity of food poverty are 34.70, 9.47, and 3.58%, respectively. When compared to other households, households with international migrants have a lower incidence, depth, and severity of poverty. The regression result of the multinomial endogenous switching model showed that international migration increases consumption per adult equivalent of households by 29.8% and is significant at the 1% level. Participation in rural-urban and international migration increases kilocalories per adult equivalent per day by 7.4 and 36.4%, respectively, in migrant-sending rural households. The findings support the new economics labor migration theory’s remittance hypothesis. Promoting access to land, capital, farm and non-farm employment, irrigation, family planning, and basic public services would improve rural household welfare and reduce the current wave of rural out-migration in Southern Ethiopia