The Impacts of Devaluation on Export Performance: The Case of Ethiopia

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 merchandise mesh (Ministry of Finance and Economic exploitation MoFED 2011 Diao et al. 2010). In 2009 with an effort to remove the miserable socio-economic circle, the government of Federal Democratic Republic of Ethiopia (FDRE) developed a branch and Transformation Plan (GTP) with a priority to export orientated outlandish development led industrialization (MoFED 2010 P. 22). Despite the over-ambitious plan, however, the performance of the export firmament has remained undeveloped which calls for sound macroeconomic policies that are crucial to combat the bottlenecks limit the sector. This essay examines the consequences of devaluation on the performance of Ethiopias export sector. Foreign change appraise is a key macroeconomic variable that determines performance of export in a country. The reasons why expor t performance depends on the foreign exchange regime in developing countries include the characteristics of exportable goods, the effectiveness of fiscal sectors and trading with foreign currencies rather than with the domestic currency (Nilsson and Nilsson 2000). Accordingly, Ethiopias export is characterized by primary agricultural products with inelastic export demand and supply, concentration of marketplace and products, and little value addition. The result of primary agricultural product export is a smaller marketing margin and insignificant bargaining force out on the world market. The financial sector is also constrained with higher(prenominal) probabilities of the existence of parallel markets that fail at allocating resources to their most efficient usage. More... ...tional political economy Theory and Policy. 9th ed. Edinburgh Gate Pearson Education. Melesse, Wondemhunegn Ezezew. 2011. The Dynamics between Real Exchange prise Movements and Trends in Trade Performance The Case of Ethiopia. Munich Personal Research text file in Economics Archive (MPRA). MPRA Paper No. 29161. Munich. Michael, Nwidobie Barine. 2011. An Impact outline of Foreign Exchange Rate Volatility on Nigerias merchandise Performance. European Journal of Economics, Finance and Administrative Sciences V (37) 47-55.National border 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.