Devaluation and Export Performance Essay -- Economics

Agriculture plays a vital role in the Ethiopian economy, contributing 42 portion of Gross Domestic Product (GDP), 80 percent of the employment and 90 percent of total trade earnings (Ministry of Finance and Economic increment MoFED 2011 Diao et al. 2010). In 2009 with an effort to remove the vicious socio-economic circle, the government of Federal antiauthoritarian Republic of Ethiopia (FDRE) developed a Growth and Transformation Plan (GTP) with a priority to export orientated agricultural development to lead industrialisation (MoFED 2010 P. 22). Despite the over-ambitious plan, however, the performance of the export sector has remained undeveloped which calls for sound macroeconomic policies that are crucial to combat the bottlenecks constraining the export sector. Foreign transform rate is a key macroeconomic variable that determines performance of export in a country. The causes why export performance depends on the inappropriate exchange regime in developing countries incl ude the characteristics of exportable goods, the force of financial sectors and trading with foreign currencies rather than with the domestic currency (Nilsson K. and Lars N. 2000). Accordingly, Ethiopias export is characterized by primary agricultural crossroads with inelastic export demand and supply, tightness of market and products, little value addition. The result of primary agricultural product export is a smaller marketing margin and insignificant dicker power on the world market. The financial sector is also constrained with higher probabilities of the existence of parallel markets that fail at allocating resources to their most economical usage. Moreover, all trade transactions are carried out with foreign currencies, predominantly with US... ... 2011. The Dynamics between Real commutation Rate Movements and Trends in TradePerformance The exercise of Ethiopia. Munich Personal RePEc (Research Papers in Economics). Munich. Michael, Nwidobie Barine. 2011. An Impact Analysis of Foreign Exchange Rate Volatility on Nigerias export Performance. European diary of Economics, Finance and Administrative Sciences Issue 37 (September) 47-55. matter Bank of Ethiopia (NBE). 2011. National Bank Annual Report 2009/10. Addis Abeba NBE. http//www.nbe.gov.et/publications/annualreport.htm (Accessed on Apri 25, 2012).Nilsson, Kristian and Lars Nilsson. 2000. Exchange Rate Regimes and Export Performance in Developing Countries. Oxford Blackwell Publishres 331-349.The World Bank (WB). 2012. World victimisation Indicators Ethiopia. WB. http//data.worldbank.org/country/ethiopia (Accessed on April 26, 2012).