Determinants of Export Trade in Econometric Study with Special Reference to Ethiopia

The objective of this study is to examine the determinants of export trade in Ethiopia over the period 1974-2014. The estimation technique used is the simultaneous equation framework with Two Stage Least Square approaches (2SLS). The variables used as determinants of demand side are the real effective exchange rate, GDP of trading partners and trade liberalization On the other hand, the variables used as determinants of export supply include Gross domestic products, the ratio of price of exports to domestic price, Infrastructure which is proxyed by internet access per 1000 person. The data is collected from NBE (2011), EEA Statistical data base CD-ROM (2012), WB and MoFED. The estimated results specified that exchange rate and trade liberalization significantly affect the export value of Ethiopia. However, GDP of trading partners is insignificant. On the other hand, on the Supply side, gross domestic product, infrastructure and policy dummy have positive and significant impacts on export supply of Ethiopia. However, relative price (the ratio of price of exports to domestic prices), is negatively related to the supply of export suggesting that some commodities are diverted to the domestic market as their prices increase. Key Terms Export, trade liberalization, Simultaneous Equation, 2SLS