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Regional economic integration of Ethiopia
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Agriculture plays a vital role in the Ethiopian economy, contributing 42 percent of Gross Domestic Product (GDP), 80 percent of the employment and 90 percent of total export earnings (Ministry of Finance and Economic Development [MoFED] 2011; Diao et al. 2010). In 2009 with an effort to remove the vicious socio-economic circle, the government of Federal Democratic Republic of Ethiopia (FDRE) developed a Growth and Transformation Plan (GTP) with a priority to export orientated agricultural development led industrialization (MoFED 2010 P. 22). Despite the over-ambitious plan, however, the performance of the export sector has remained undeveloped which calls for sound macroeconomic policies that are crucial to combat the bottlenecks constraining the sector. This essay examines the consequences of devaluation on the performance of Ethiopia's export sector.
Foreign exchange rate is a key macroeconomic variable that determines performance of export in a country. The reasons why export performance depends on the foreign exchange regime in developing countries include: the characteristics of exportable goods, the effectiveness of financial sectors and trading with foreign currencies rather than with the domestic currency (Nilsson and Nilsson 2000). Accordingly, Ethiopia's export is characterized by primary agricultural products with inelastic export demand and supply, concentration of market and products, and little value addition. The result of primary agricultural product export is a smaller marketing margin and insignificant bargaining power on the world market. The financial sector is also constrained with higher probabilities of the existence of parallel markets that fail at allocating resources to their most efficient usage. More...
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...tional Economics: Theory and Policy. 9th ed. Edinburgh Gate: Pearson Education.
Melesse, Wondemhunegn Ezezew. 2011. “The Dynamics between Real Exchange Rate Movements and Trends in Trade Performance: The Case of Ethiopia.” Munich Personal Research Papers in Economics Archive (MPRA). MPRA Paper No. 29161. Munich.
Michael, Nwidobie Barine. 2011. “An Impact Analysis of Foreign Exchange Rate Volatility on Nigeria’s Export Performance.” European Journal of Economics, Finance and Administrative Sciences V (37): 47-55.
National Bank of Ethiopia (NBE). 2011. National Bank Annual Report 2009/10. Addis Abeba: NBE.
Nilsson, Kristian and Lars Nilsson. 2000. “Exchange Rate Regimes and Export Performance in Developing Countries.” Oxford: Blackwell Publishers: 331-349.
World Bank (WB). 2012. “World Development Indicators Database: Ethiopia.” Washington, DC: WB.
Many researches have been conducted on the influence that the increasing exchange rate has on the trade balance deficit in developing countries. This paper contributes to the literature by investigating and testing whether the J-curve phenomenon exists in Jamaica.
The real exchange rate tells us the rate at which we can trade the goods of one country for goods from other countries. The real exchange rate some- times referred to as the terms of trade. To view the exchange rate relationship in real terms using the nominal exchange rate, can be taken samples h a goods produced in some countries, such as cars. Suppose the price of the car with 25,000 dollars, while the price of Japanese cars is 4,000,000 yen . To compare the prices of both cars , we have to transform them into a common currency. If one dollar worth of 80 yen , the price of cars Americans to 80 x 25,000, or 2,000,000 yen. By comparing the price of an American car (2,000,000 yen) and the price of Japanese cars (4,000,000 yen), it can be concluded that the price of the American car is half the price of Japanese cars . In other words, pad a price effect we can swap two American cars to get a Japanese car . Peng count can be written as
When studying Angola’s inflation rates and economy structure it is important to understand the inherent challenges faced. Unlike the US, Angola has a poorly developed infrastructure that makes moving goods and equipment difficult and costly. Also Angola suffers from an inefficient trading system with her African neighbors. Each side is required to first exchange their currencies into a third party foreign currency, like the US dollar, then they can conduct business. This makes transactions complex, time consuming, and expensive. Examples like this form the basis on why Angola’s inflation rates are relatively high. From 2009 to 2011 Angola dealt with rates between 13.5% and 14.5%. From 2012 to 2014 the inflation rates have steadily declined
Weiss, J. (2005). Export Growth and Industrial Policy:Lessons from the East Asian Miracle experience. ADB Institute Discussion Paper .
Ethiopia is called a third world country because of its poverty rate. The economy relies on agriculture which makes up 45% of the gross domestic product (GDP) and 85% of their employment. Farmers deal with repeated droughts that affect their farming. Coffee was sold oversees in 2006 for $350 million so it is an important export, but with the decreased p...
The IMF representative in the clip claims that, “They needed to expand their exports and diminish their imports and the best way of doing that is to make foreign currency more expensive.” Whether done intentionally or not, the only economies that seemed to have prospered from this new relationship and reduced trade barriers are those countries that are already economically sufficient. Judging from the negative effects that befell Jamaica when it reduced its trade barriers, it could be concluded developed countries were looking for new markets to import their goods and set their eyes on Jamaica, a tiny country that they could easily intimidate into submission. In the video clip, vendors complained about the large amounts of foreign fruits and vegetables that were now in their market and stated that these imports were hurting their businesses. While local farmers are failing to find a market for their produce, foreign countries have found a market for their exports in the local supermarkets. As mentioned in the video clip, supermarkets seemed to be doing well with the overseas produce because they are being sold for less than the local produce. The reduction of trade barriers has introduced a new competitor to Jamaican markets that mirrors
total value of the imports of the country. It benefits Nigeria’s oil, natural gas, coal,
Overall Central Africa’s dependence on agriculture could improve the wellbeing of the people but a long history of corruption, violence, and prevalent transportation issues have hindered an improvement in the economy resulting in poverty among the region. Poverty will not subside unless these issues are dealt with and improved.
The stability of currency values plays a significant role for economic and financial stability. It is not difficult to see the exchange rate fluctuations are widely regarded as damaging. As the movements of the exchange rate have significant and large effects on the trade balance, resource allocation, domestic prices, interest rate, national income and other key economic variables. Then can exchange rate movements be predicted by these fundamental economic variables?
The international community have highlighted the benefits that efficient and effective trade in Africa could potentially hold; the G8 in 2005 (and again in...
Artadi, Elsa V., and Xavier Sala-i-Martin. The Economic Tragedy of the XXth Century: Growth in Africa. Cambridge, MA: National Bureau of Economic Research, 2003. Print.
Ghana is a country located on the west coast of Africa; Africa is a resource rich continent that supplies much of the world with diamonds, oils, petroleum and more through trade. The country of Ghana has undergone revision in their labor forces in the past twenty years, Ghana has moved more from the traditional labor sector like agriculture to more modern sectors. One of the more modern sectors of Ghana today is the industrial sector which is relatively small and is mainly operated by the Ghanaian government. The industrial sector was expanded by the government and president to employ the unemployed and promote investment in the private sector. After the 1990’s Ghana has seen consistent economic growth but their economic growth from the last eight years has increased tremendously. In the most recent of years ( after 2004) the growth rate of Ghana started to accelerate and it increased to over six percent between a five year span from 2005-2010, with the average being above seven percent in 2000 and 2009. The increase in sectors has taken Ghana from a poverty rate of more than half 51.7% to 28.5% by the year 2005. Before Ghana’s independence on March 6, 1957 most of the country’s gdp was contributed to agriculture and the industry sector was less of a contributor. Recently, between the years of 2001-2010 the roles of whom or what contributes to the gdp has switched. Most of the contribution to the gdp is that of the service sector. Even though, the service sector has risen to the top of the economy, agriculture is slowly but surely is rising back to the top of Ghana’s highest gdp contributor by the way of nontraditional exports like automobiles and cocoa. The service sector of Ghana provides many residents w...
The foreign exchange market is one of important mechanism in the international business because foreign exchange is an intermediary for all nations in term of the growth of the economy. There are many functions of foreign exchange market in the global economy. In the international business, it uses the foreign exchange markets in four ways. First, the pay...
The first of these exchange rates, nominal, is the number of units of a given currency that can purchase a unit of a given foreign currency (INSERT CITATION). When using this rate, countries are able to value of their own currency relative to one-another when trading in the foreign exchange market. This principle, however, is not exclusive to trading currencies. Similar to the nominal exchange rate, the real exchange rate uses goods and services in place of currency. As a result, it is defined as the amount of goods or services that can be traded in one country for a good or service in another country. Using this rate, countries are able to gauge the competitiveness of their goods and services in trading with any given country, making it a key factor for countries trading in the global economy.