ANALYSIS OF THE ETHIOPIAN AGRICULTURAL EXPORT PERFORMANCE: A DYNAMIC PANEL DATA ANALYSIS

Abstract

Despite the enormous efforts made by the Government of Ethiopia to address the export sector's issues over the past 20 years, the nation has experienced a trade deficit and a budget imbalance. As a result of the growing disparity between export and import values, Ethiopia's trade balance has been getting worse over time. Therefore, the main objective of the study was to examine the determinants of Ethiopian agricultural exports using a dynamic panel data approach. Specifically, the study was expected to assess the trend, composition, and the major destinations of Ethiopian exports, to identify key determinates of the performance level of agricultural volume and value of export and to identify systemic and operational bottlenecks of agricultural export. The study used panel data for the period 2000-2020 for Ethiopia's top 29 agricultural export commodities. The commodities were chosen based on the basis of volume and value of export and availability of required data during the study period. Using the natural logarithm of agricultural export value of each commodity, and the selected the demand and supply side determinant factors of agricultural export of the commodity-like lag of agricultural export commodity, RGDP, exchange rate, consumer price index, labor force, total road network coverage, corruption index, foreign direct investment, indirect tax revenue, total domestic saving, and trade openness. The result showed that all variables were significant factors that determine Ethiopia's agricultural commodity export. From these determining factors lag of agricultural export, economic growth, Foreign Direct Invest, and Terms of Trade have a positive and significant effect on Agricultural commodity export at one-step system GMM. Whereas the remaining variables are exchange rate, labor force, Gross Domestic Saving, Road, indirect tax revenue, consumer price index, and corruption index have a significant and negative effect on agricultural export. The researcher concluded that lowering corruption and indirect tax on export, and poor quality of the road, gross domestic saving which hinders the agriculture sector (lack of agriculture financing) would motivate private investment in the export sector. Besides, controlling rapid population growth would decrease domestic consumption of exportable commodities and would increase export surplus. Finally the researcher recommended that a concerted effort should be directed towards productive channels of agricultural commodity in the economy so as to enhance sustainable economic growth through increased agricultural commodity export.