Determinants Of International Trade Performance In Ethiopia

Abstract

This paper analysed Ethiopian International trade performance and net-export trends for the period 2001-2021. Secondary data was collected from, World Bank Reports, National Bank of Ethiopian Annual Report, Ethiopian Custom Commission and Ethiopian Trade Commission up on annual base reports. In order to know the long run and short run determinants, simple linear regression model was employed. The empirical finding on Ethiopian net-export determination model confirms that, commercial banks and other lending, residual merchandise imports by the reporting economy, official exchange rate, and Manufacturing value added annual growth are significant determinants that negatively affects Ethiopian performance in international trade. The regression result also indicated that neither growth nor inflation rate are important predictors of Ethiopia's performance in international commerce.Finally, Ethiopia has a negative net export value or trade deficit, which may let her, performs lesser in international trade due to the above listed determinants. Finally researcher has forward some recommendations drawn from the conclusions. Government should reduce over-dependence on importing Manufacturing value added goods and encourage domestic venders as import substitutions instead. Government should put in place policies that promote industrialization and enhance domestic production to enlarge export level. The result further shows that exchange rate depreciation leads to reduction in competitiveness of Ethiopian trade balance. There is, therefore, the need for robust and consistent exchange rate policy that would ensure that the exchange rate is not overvalue