The effect of exchange rates on economic growth in Ethiopia PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download The effect of exchange rates on economic growth in Ethiopia PDF full book. Access full book title The effect of exchange rates on economic growth in Ethiopia by Muluken Nigussie Tessema. Download full books in PDF and EPUB format.
Author: Muluken Nigussie Tessema
Publisher: GRIN Verlag
ISBN: 334614514X
Category : Business & Economics
Languages : en
Pages : 81
Get Book
Book Description
Master's Thesis from the year 2016 in the subject Business economics - General, grade: 3.68, Saint Mary's University, language: English, abstract: This study attempts to investigate the effect of exchange rates on economic growth in Ethiopia using annual time series data spanning from 1985/86 to 2014/15. The explanatory variables in this study were real effective exchange rate, government final consumption expenditure, gross fixed capital formation, broad money supply and trade openness. The multilateral real exchange rates is used to measure real exchange rates. Results from Vector Error Correction Model revealed that real effective exchange rates, broad money supply and trade openness have a positive long run effect on economic growth, while government final consumption have a negative long run effect on the economic growth of Ethiopia. From the regression results, it was noted that undervaluation of the currency is contractionary in the long run and neutral in the short- run. As such, the effect of exchange rates on economic growth works through the supply channel. It is the reflection of various economic and policy shocks, mainly a strategy shifts, of the government. Based on the findings of this study, the researcher recommended that since the Ethiopian output is dominated by primary agricultural products and it is insensitive for the change in exchange rate. Government intervention is needed to balance the adverse effect of exchange rate movements until the economy well transformed from agricultural lead economy to industrial lead economy and becomes less dependent on imported raw materials.
Author: Muluken Nigussie Tessema
Publisher: GRIN Verlag
ISBN: 334614514X
Category : Business & Economics
Languages : en
Pages : 81
Get Book
Book Description
Master's Thesis from the year 2016 in the subject Business economics - General, grade: 3.68, Saint Mary's University, language: English, abstract: This study attempts to investigate the effect of exchange rates on economic growth in Ethiopia using annual time series data spanning from 1985/86 to 2014/15. The explanatory variables in this study were real effective exchange rate, government final consumption expenditure, gross fixed capital formation, broad money supply and trade openness. The multilateral real exchange rates is used to measure real exchange rates. Results from Vector Error Correction Model revealed that real effective exchange rates, broad money supply and trade openness have a positive long run effect on economic growth, while government final consumption have a negative long run effect on the economic growth of Ethiopia. From the regression results, it was noted that undervaluation of the currency is contractionary in the long run and neutral in the short- run. As such, the effect of exchange rates on economic growth works through the supply channel. It is the reflection of various economic and policy shocks, mainly a strategy shifts, of the government. Based on the findings of this study, the researcher recommended that since the Ethiopian output is dominated by primary agricultural products and it is insensitive for the change in exchange rate. Government intervention is needed to balance the adverse effect of exchange rate movements until the economy well transformed from agricultural lead economy to industrial lead economy and becomes less dependent on imported raw materials.
Author: Muluken Nigussie Tessema
Publisher:
ISBN: 9783330069671
Category :
Languages : en
Pages : 92
Get Book
Book Description
Author: Asmerom Kidane
Publisher:
ISBN:
Category : Ethiopia
Languages : en
Pages : 56
Get Book
Book Description
Author: Gediyon Bekele Moliso
Publisher: GRIN Verlag
ISBN: 3346521524
Category : Business & Economics
Languages : en
Pages : 41
Get Book
Book Description
Academic Paper from the year 2021 in the subject Economics - Monetary theory and policy, grade: A, , language: English, abstract: This study examined the effect of monetary policies on Total Trade (proxy of international trade) in Ethiopia between 1989 to 2019.International trade was captured using Total Trade (proxy of international trade) while the independent variables that described the various macroeconomic policies in Ethiopia were money supply, exchange rate, real lending rate and inflation rate. Time series data on the variables of the study was gotten from Annual reports of the National Bank of Ethiopia (NBE) from 1989-2019. The secondary data was analyzed using E-views 9.0 software. A model was formulated for the study. The Augmented Dickey Fuller (ADF) stationary test showed that the variables in the study were stable at both levels and at first difference. The regression of the independent variables with Total Trade (proxy of international trade) showed the existence of a long run relationship. Using the Autoregressive Distribute Model (ARDL), the empirical results money supply exerts a significant positive effect on Total Trade (proxy of international trade) in the long run while real lending rate and inflation rate exerts a significant negative effect on Total Trade (proxy of international trade) in the long run and Total Trade (proxy of international trade) one period lag of the variable significantly affects the Total Trade (proxy of international trade) in the short run. LagTT or D(LTT(-1)), a one percent increase in expectation push Total Trade (proxy of international trade) by 51% in short run. This result is similar to the theory of adaptive expectations, they states that individuals will form future expectations based on past events. The study thus concluded that the monetary policy channels through which Total Trade (proxy of international trade) in Ethiopia can be influenced are money supply, lending rate and inflation rate. The study testes all the diagnostic test like serial correlation, Normality, heteroschedasticity and stability. The estimate of the speed of adjustment coefficient found in this study indicates that about a 75% of the variation in the Total Trade (proxy of international trade) from its equilibrium level is corrected within a year.
Author: Deseke Kebede
Publisher: GRIN Verlag
ISBN: 3668582432
Category : Business & Economics
Languages : en
Pages : 63
Get Book
Book Description
Research Paper (undergraduate) from the year 2017 in the subject Economics - Economic Cycle and Growth, grade: 1, , language: English, abstract: The purpose of the study is to examine the relationship between inflation and economic growth in Ethiopia over the period of 1991/92- 2014/15 by using data at quarter base. The study was employed Johansen method of co-integration and vector error correction model and a technique of conditional least square. The result shows that both in long-run and short-run the relationship between inflation and economic growth is positive. Despite to this, the granger causality test tells us bi- directional causation between these two variables. The result also revealed that threshold level of inflation beyond on which inflation negatively affects economic growth of Ethiopia is 5 percent. Therefore, co-ordination between macro- economic policy makers is vital and should have to raise their hands and put their eyes on measures that keep down inflation below 5 percent to have sustainable economic growth in the country.
Author: Gediyon Bekele Moliso
Publisher: GRIN Verlag
ISBN: 3346721086
Category : Business & Economics
Languages : en
Pages : 30
Get Book
Book Description
Academic Paper from the year 2022 in the subject Economics - Monetary theory and policy, , language: English, abstract: The goal of this research is to close lack of sufficient, contemporary and comprehensive studies on the topic under study and gain a better understanding of the relationship between monetary policy and Ethiopian inflation. The paper is organized as follows. After this introduction, the following section reviews the relevant literature, both theoretical and empirical. After this review, the methodological framework is presented. A series of test are show to assess the sensibility of the model. The discussion of the results is presented. Finally, some concluding remarks are shown. The monetary policy pursued by a country's Central Bank has a significant impact on the country's economic and financial status. It is commonly acknowledged that maintaining price stability through monetary policy can contribute to long-term growth. When the rate of inflation is low enough, consumers and companies do not have to consider it when making daily decisions, according to Christiano and Fitzgerald. The method, through which a country's monetary authority manages the supply of money, frequently by targeting an interest rate in order to promote economic growth and stability, is known as monetary policy. It is essentially a set of actions performed by monetary authorities, usually the central bank, to control and regulate the supply of money to the public as well as the flow of credit in order to achieve preset macroeconomic objectives. Its stated objective is to maintain relatively steady pricing and low unemployment. All methods of monetary policy, in reality, require changing the amount of base currency in circulation. Open market operations are the open sales and purchases of (government-issued) debt and credit instruments that change the liquidity of the base currency. The monetary authority's constant market operations influence the supply of currency, which has an impact on other market variables including short-term interest rates and the exchange rate.
Author: Fiseha Haile
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
Get Book
Book Description
Ethiopia has achieved sustained high growth for more than a decade. At the same time, the country has been facing several economic challenges, including falling exports, chronic foreign currency shortages, as well as a slow pace of structural transformation. In recent years, the already overvalued birr has appreciated sharply in real terms, partly driven by the appreciation of the dollar, thereby making Ethiopia's competitiveness and industrialization drive more difficult. In response to these challenges, this paper looks at the question of why the real exchange rate is a useful policy instrument. The analysis suggests that Ethiopia needs a more flexible exchange rate policy. A competitive or undervalued exchange rate is important in bringing about productivity-enhancing structural change. There is robust evidence that a real devaluation stimulates exports in general and manufacturing exports in particular, improves the trade and current account balances, and spurs economic growth. Currency undervaluation is a second-best policy intervention that can help offset some of the key constraints to manufacturing growth prevalent in low-income countries and speed up structural transformation. However, exchange rate adjustments need to take into account the increase in the cost of capital imports and debt burden.
Author: Tewolde Girma Hailemikael
Publisher: GRIN Verlag
ISBN: 366841887X
Category : Political Science
Languages : en
Pages : 18
Get Book
Book Description
Research Paper (postgraduate) from the year 2013 in the subject Business economics - Economic Policy, grade: Very good, Bahir Dar University, course: Economic Policy analysis, language: English, abstract: The main objective of the study is to examine the effect of budget deficit on monetary aggregates and the foreign sector of Ethiopia using the Vector Error Correction Model over the period 1970/71 to 2010/11. Estimation result shows the existence of a fairly significant relationship between fiscal deficit, monetary aggregates and the foreign sector in Ethiopia. Budget deficit is at the root of monetary expansion. Monetary expansion intern contributes positively to rising inflation and overvalued exchange rate. The Inflation and overvalued exchange rate intern contributes to the low performances of the foreign sector through adversely affecting export incentive. Fiscal deficit for small open economy like Ethiopia is also sign of stimulated domestic import demand, because government not only spends on goods and services produced in domestic economy. Thus, the result is in favor of the twin deficit hypothesis therefore fiscal restraint bucked by export diversification will improve the performance of the foreign sector and status of inflation.
Author: Fiseha Haile Gebregziabher
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
Get Book
Book Description
Ethiopia has achieved sustained high growth for more than a decade. At the same time, the country has been facing several economic challenges, including falling exports, chronic foreign currency shortages, as well as a slow pace of structural transformation. In recent years, the already overvalued birr has appreciated sharply in real terms, partly driven by the appreciation of the dollar, thereby making Ethiopia?s competitiveness and industrialization drive more difficult. In response to these challenges, this paper looks at the question of why the real exchange rate is a useful policy instrument. The analysis suggests that Ethiopia needs a more flexible exchange rate policy. A competitive or undervalued exchange rate is important in bringing about productivity-enhancing structural change. There is robust evidence that a real devaluation stimulates exports in general and manufacturing exports in particular, improves the trade and current account balances, and spurs economic growth. Currency undervaluation is a second-best policy intervention that can help offset some of the key constraints to manufacturing growth prevalent in low-income countries and speed up structural transformation. However, exchange rate adjustments need to take into account the increase in the cost of capital imports and debt burden.
Author: Paul Dorosh
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
Get Book
Book Description
Ethiopia enjoyed remarkable economic growth from 2004/05 to 2008/09, in large part due to increases in foreign transfers and capital inflows combined with expanded domestic credit to fund major increases in private and public investments in infrastructure and housing. However, this rapid growth was accompanied by a major appreciation of the real exchange rate (by 34 percent between July 2004 and July 2008) that reduced incentives for domestic production of exportables and non-protected importables. Moreover, major external shocks to the economy (including increases in world prices of fuel in 2007 and early 2008) exacerbated foreign exchange and macro-economic imbalances. Beginning in March 2008, access to foreign exchange for imports has been restricted (rationed) to avoid excessive drawdown of foreign exchange reserves. Computable General Equilibrium (CGE) model simulations suggest that there are substantial adverse efficiency and distributional effects of foreign exchange rationing. Foreign exchange controls result in the creation of large rents that likely accrue mainly to nonpoor households. At the same time, foreign exchange controls reduce economic efficiency so that real incomes from factors of production (land, capital and labor) decline, as do overall household incomes (except for those who gain large rents). Moreover, foreign exchange controls inhibit depreciation of the real exchange rate, and thus slow or prevent reversal of the real exchange rate appreciation between 2004/05 and 2007/08, which has resulted in major price disincentives for exports and production of import substitutes. The modeling results presented here are not meant as definitive estimates, but rather as indicators of the broad magnitudes of the effect of the policies simulated. Further efforts are needed to refine the model simulations so as to include the effects of changes in world prices and to assess dynamic effects of shocks and policies on growth and income distribution. Nonetheless, the broad policy implications of this analysis are clear. There are substantial costs to both foreign exchange rationing and real exchange rate appreciation in terms of growth (reduced incentives for production of tradables) and income distribution (large rents accruing to the non-poor). Policy reforms need not involve full liberalization of the foreign exchange market, however. Various versions of managed floats and controls in foreign capital markets exist that can gradually reduce economic rents, improve incentives for exports and increase overall economic efficiency. Indeed, policies since late 2008 have effectively reduced the earlier appreciation of the real exchange rate. To recover more fully from the effects of the adverse external price and capital inflow shocks of 2007 and 2008, and to sustain the rapid propoor growth of recent years, though, further measures to restore real price incentives to exports, and reduce rents and economic inefficiencies arising from import rationing should be considered.
