An Economic Analysis of the Impact of Globalization on Ethiopian Economy: An Application of Error Correction Model

Nowadays the issue of globalization has received huge attention  from researchers in different areas for the fact that we always hear about it but there exists little evidences of convergences. While some researchers argue pro globalization others pointed out the costs of globalization being outweighs its benefits and it fails to meet its potentials of benefiting both developing and developed world. This study has attempted to investigate the economic impact of globalization on Ethiopia using the annual data covering from 1991 to 2016 and by employing a co-integration analysis.The empirical result revealed that economic growth of Ethiopia is being affected by globalization both in the short-run and long-run. Thus economic growth and globalization have a long-run relationship which is found to be both positive and significant. Therefore, Ethiopia can be benefited more provided that if the economy of country is integrated and opened to competitions from the rest of the world. Keywords: Co-Integration Analysis, ECM, Economic Growth, Ethiopia, FDI, Globalization, Trade Opennes

Does the Export Competitiveness of Coffee Improving So far?

The general objective of the study is to examine the export competitiveness and determinants of export performance of the Ethiopian coffee sector. In analyzing competitiveness of the country in its coffee exports, data from UNCTAD-ITC is used for the periods 1991-2016. The Revealed Comparative Advantage (RCA) and Revealed Symmetric Comparative Advantage (RSCA) measures of competitiveness were used for the analysis. Furthermore, a multiple regression (OLS model) has also been employed to investigate the determinants of coffee export competitiveness and performance as well. Results for the RCA and RSCA showed that Ethiopia has comparative advantage in exports of coffee. The regression analysis revealed domestic consumption level of coffee affects export competitiveness adversely and this relationship is statistically significant. All other variables including domestic production level, world price of coffee, exchange rate and export volume were found to affect export competitiveness positively and the effect is significant. Though domestic producer price affects the export performance of the sector positively, the effect is statistically insignificant. The government of Ethiopia should put measures in place to address current inefficiencies on the supply side, most importantly management of price risk, resulting from the volatile nature of coffee prices, both domestic and international and the gap between the time of purchase of beans from buyers and the sale to exporters, quality control, smuggling, illegal dealers and transaction cost

An Assessment of the Economic Impact of Globalization In Ethiopia: A Co-Integration Analysis

Nowadays the issue of globalization has received huge attention from researchers in different areas for the fact that we always hear about it but there exists little evidences of convergences. While some researchers argue pro globalization others pointed out the costs of globalization being outweighs its benefits and it fails to meet its potentials of benefiting both developing and developed world. This study has attempted to investigate the economic impact of globalization on Ethiopia using the annual data covering from 1980 to 2015 and by employing a co-integration analysis. The empirical result revealed that economic growth of Ethiopia is being affected by globalization both in the short-run and long-run. Thus economic growth and globalization have a long-run relationship which is found to be both positive and significant. Therefore, Ethiopia can be benefited more provided that if the economy of country is integrated and opened to competitions from the rest of the world

An Assessment of the Economic Impact of Globalization In Ethiopia: A Co-Integration Analysis

Nowadays the issue of globalization has received huge attention from researchers in different areas for the fact that we always hear about it but there exists little evidences of convergences. While some researchers argue pro globalization others pointed out the costs of globalization being outweighs its benefits and it fails to meet its potentials of benefiting both developing and developed world. This study has attempted to investigate the economic impact of globalization on Ethiopia using the annual data covering from 1980 to 2015 and by employing a co-integration analysis. The empirical result revealed that economic growth of Ethiopia is being affected by globalization both in the short-run and long-run. Thus economic growth and globalization have a long-run relationship which is found to be both positive and significant. Therefore, Ethiopia can be benefited more provided that if the economy of country is integrated and opened to competitions from the rest of the world

Economic Analysis of the Impact of Development Aid : An Application of Error Correction Modelling (ECM) to Ethiopia

Foreign aid inflows have grown significantly in the post-war period. Many studies have tried to assess the effectiveness of aid at the micro- and macro-level. While micro evaluations have found that in most cases aid ‘works’, those at the macro-level are ambiguous. This paper investigates the impact of foreign aid on economic growth in Ethiopia using time series data for the period 1981 to 2015. The main objective is to identify the relationship that aid has with the developmental path of the country and whether one can reasonably link outcomes to aid inputs. To this end, the study used the production function initiated by Solow-Swan model and cointegration analysis. The study is able to demonstrate the existence of long-run relationship between the official development assistance and economic growth of Ethiopia. The study found that there is negative relationship between ODA and economic growth in the short run and tend to be positive in the long run

Export Survival of Manufacturing Firms in Ethiopia:Empirical Evidence

This study used panel data for manufacturing firms from 2006 to 2016 to analyze the patterns and determinants of export survival of exporting firms in Ethiopia. The empirical investigation has two parts: non-parametric and semi-parametric methods. The non-parametric method analyzes the survivor function and the hazard (exit) rate of firms on the whole sample and by groups, while the semi-parametric analyzes a regression outputs based on the discrete-time model of proportional hazard model. The result from the survivor function analysis shows that, at the end of the study period, the number of firms that survive in export market are more than 50%. Moreover, the result of the hazard rate reveals as the duration of time increases, the rate at which firms exit the export market decreases sharply. With regard to our semi-parametric analyses, we examine the factors that affect survival of manufacturing firms in international market and observed the direction of the impacts they have on the survival rates. The findings show that large and medium firms, firms that have higher productivity, export oriented firms, private owned enterprises, firms located in textile and garment industries, firms located outside Addis Ababa and firms categorized as importers have higher probability of staying in export markets than the others

Do Prices Influence Economic Growth?

The study empirically examines the relationship between changes in the general price and economic growth in Ethiopia. The relevant macroeconomic variables are used in a quarterly dataset from 1992Q1 to 2015Q4 obtained from the National Bank of Ethiopia (NBE), Central Statistics Agency (CSA) , Ministry of Finance and Economic Corporation (MoFEC) and an international data sources including World penn Table and World Development Indictors (WDI). In assessing the relationship between prices and economic growth, an interesting policy issue arises. What is the threshold level of inflation for the Ethiopian economy? Real GDP growth used as a proxy for economic growth and general prices measured using the consumer price index (CPI), the study uses the Conditional Least Square (CLS) technique employed by Khan and Senhadji (2000). The estimation result suggests that 10% as the optimal level of inflation that facilitates economic growth. An inflation level higher than the estimated threshold level will affect the growth of the real GDP negatively. Likewise, if inflation rate is below the threshold level, it hurts the economy as real GDP could have grown more since inflation is positively related below the threshold point. Therefore, fiscal and monetary policy coordination is vital to keep inflation at its threshold level. This finding is useful for macroeconomic policy makers at the central bank as a guide for inflation targeting monetary policy

Do Prices Influence Economic Growth?

The study empirically examines the relationship between changes in the general price and economic growth in Ethiopia. The relevant macroeconomic variables are used in a quarterly dataset from 1992Q1 to 2015Q4 obtained from the National Bank of Ethiopia (NBE), Central Statistics Agency (CSA) , Ministry of Finance and Economic Corporation (MoFEC) and an international data sources including World penn Table and World Development Indictors (WDI). In assessing the relationship between prices and economic growth, an interesting policy issue arises. What is the threshold level of inflation for the Ethiopian economy? Real GDP growth used as a proxy for economic growth and general prices measured using the consumer price index (CPI), the study uses the Conditional Least Square (CLS) technique employed by Khan and Senhadji (2000). The estimation result suggests that 10% as the optimal level of inflation that facilitates economic growth. An inflation level higher than the estimated threshold level will affect the growth of the real GDP negatively. Likewise, if inflation rate is below the threshold level, it hurts the economy as real GDP could have grown more since inflation is positively related below the threshold point. Therefore, fiscal and monetary policy coordination is vital to keep inflation at its threshold level. This finding is useful for macroeconomic policy makers at the central bank as a guide for inflation targeting monetary policy

Export Survival of Manufacturing Firms in Ethiopia:Empirical Evidence

This study used panel data for manufacturing firms from 2006 to 2016 to analyze the patterns and determinants of export survival of exporting firms in Ethiopia. The empirical investigation has two parts: non-parametric and semi-parametric methods. The non-parametric method analyzes the survivor function and the hazard (exit) rate of firms on the whole sample and by groups, while the semi-parametric analyzes a regression outputs based on the discrete-time model of proportional hazard model. The result from the survivor function analysis shows that, at the end of the study period, the number of firms that survive in export market are more than 50%. Moreover, the result of the hazard rate reveals as the duration of time increases, the rate at which firms exit the export market decreases sharply. With regard to our semi-parametric analyses, we examine the factors that affect survival of manufacturing firms in international market and observed the direction of the impacts they have on the survival rates. The findings show that large and medium firms, firms that have higher productivity, export oriented firms, private owned enterprises, firms located in textile and garment industries, firms located outside Addis Ababa and firms categorized as importers have higher probability of staying in export markets than the others