DETERMINANTS OF ETHIOPIA’S MANUFACTURING EXPORTS

Abstract

Exports play an important role in an economy by influencing the level of economic growth, employment and the balance of payments. The aims of this paper is to analyze the determinants of Ethiopia’s manufacturing exports to its ten exporting countries using panel data for the period of 10 years (2009-2018) and analyzed using dynamic gravity model. The estimation results showed that the dynamic gravity model fits the data well, indicating strong evidence that Ethiopia’s manufacturing exports are autoregressive. Besides, the results indicated that Ethiopia’s manufacturing exports pattern followed the basic gravity model. Which means Ethiopia’s manufacturing export is directly proportional to economic masses peroxide by importing countries GDP. Whereas Ethiopia’s manufacturing export is inversely related to transportation costs of trading partner of Ethiopia. The result also asserted the positive relationship between exports and importing countries GDP per capita, indicating that the higher the income of consumer increases the purchasing power of more goods and hence export volume of exporting country (Ethiopia in this case) increases to this country. The Based on the finding promoting exports to rich economies, which are located in a close distance, improvement of infrastructures which reduces transportation costs and devaluating currency are the vital steps to boost Ethiopia’s manufacturing export performance.