The Dynamics between Real Exchange Rate Movements and Trends in Trade Performance: The Case of Ethiopia

Abstract

ABSTRACT Ethiopia’s exchange rate policies have been a bone of contention for concerned economic analysts and commentators alike. This study takes a new look at the record to explore the impact of exchange rate liberalization reforms on export growth in Ethiopia. I employ generalized method of moments estimators (GMM) techniques on time series data for the period 1981- 2009. The study does not support the widely held view that exchange rate reforms induce export growth. But world income was found to positively impact Ethiopia’s export receipts over time.KEYWORDS: Real Exchange Rate, Devaluation, Export Performance.