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Determinant of Trade Balance in Ethiopia: Approaches from Autoregressive Distributive Lag (ARDL) Model

Received: 7 November 2021     Accepted: 24 November 2021     Published: 24 December 2021
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Abstract

The overarching purpose of this study was to use approaches from the Autoregressive Distributive Lag (ARDL) Model to uncover the causes of Ethiopia's trade balance. Ethiopia's economy was primarily reliant on earnings from the sale of primary commodities, focused on a small number of export commodities and market outlays to finance the importation of desperately needed capital goods. As a result, the country's exports failed, resulting in a persistent trade imbalance in international trade. As a result, the study concentrated on the key determinants of Ethiopia's trade balance, including the structure, value, volume, and direction of Ethiopia's export and import. The bound testing approach of Johansson co-integration test and error correction model was developed within the autoregressive distributed lag (ARDL) model framework, and annual data for the period 1990 to 2020 was used to investigate whether a short run and long run relationship exists between trade balance and its determinants. The main purpose of this paper was to show that lnFEA might show long-run negative and short-run positive trade balance relationships. lag trade balance, on the other hand, has a short-term positive relationship with trade balance, but REER has a long-term and short-term negative relationship with trade balance.

Published in Journal of World Economic Research (Volume 10, Issue 2)
DOI 10.11648/j.jwer.20211002.14
Page(s) 62-73
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

ARDL, Economic Growth, Export, Import, Trade Balance

References
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[7] Mannur, H. G., (1983), International economics theory and Policy Issues: Vikas Publishing House Ltd, New Delhi, 4, 4, 378p with figures+ 22cm x 14cm.
[8] Ms. Kalpana Kochhar & Mingwei Yuan, 1994. "China'S Imports: An Empirical Analysis Using Johansen'S Cointegration Approach," IMF Working Papers 1994/145, International Monetary Fund.
[9] National Bank of Ethiopia (NBE), Annual Report on the Ethiopia economy, 1999/00.
[10] Patrick M Wright, Benjamin B Dunford, Scott A Snell (2001):, Journal of management: Volume 27: Issue: 6, Pages: 701-721: Publisher: Sage Publications.
[11] Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16 (3), 289–326. http://www.jstor.org/stable/2678547
[12] Rao, P. U., 1994. Chemical composition and nutritional evaluation of spent silk worm pupae. J. Agric. Food Chem., 42 (10): 2201-2203: https://doi.org/10.1021/jf00046a023
[13] Rose R, Mackenzie WJM. Comparing Forms of Comparative Analysis. Political Studies. 1991; 39 (3): 446-462. doi: 10.1111/j.1467-9248.1991.tb01622.x.
[14] The Columbia Encyclopedia (2004), 6 Edition: Columbia University press.
[15] Thingan, M. L. (2004). Monetary economics 6th edition, mayor vihar: Brinda publication LTD. World Bank (1991). World Development Report. The Challenges of Development, oxford University Press, Oxford, UK.
[16] World Bank economic review (2002), WBER, Document, Government publication, International government publication, Periodical, Internet resource, Internet Resource, Computer File, Journal / Magazine / Newspaper, ISSN: 1564-698X.
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  • APA Style

    Alemayehu Temesgen Befikadu. (2021). Determinant of Trade Balance in Ethiopia: Approaches from Autoregressive Distributive Lag (ARDL) Model. Journal of World Economic Research, 10(2), 62-73. https://doi.org/10.11648/j.jwer.20211002.14

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    ACS Style

    Alemayehu Temesgen Befikadu. Determinant of Trade Balance in Ethiopia: Approaches from Autoregressive Distributive Lag (ARDL) Model. J. World Econ. Res. 2021, 10(2), 62-73. doi: 10.11648/j.jwer.20211002.14

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    AMA Style

    Alemayehu Temesgen Befikadu. Determinant of Trade Balance in Ethiopia: Approaches from Autoregressive Distributive Lag (ARDL) Model. J World Econ Res. 2021;10(2):62-73. doi: 10.11648/j.jwer.20211002.14

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  • @article{10.11648/j.jwer.20211002.14,
      author = {Alemayehu Temesgen Befikadu},
      title = {Determinant of Trade Balance in Ethiopia: Approaches from Autoregressive Distributive Lag (ARDL) Model},
      journal = {Journal of World Economic Research},
      volume = {10},
      number = {2},
      pages = {62-73},
      doi = {10.11648/j.jwer.20211002.14},
      url = {https://doi.org/10.11648/j.jwer.20211002.14},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20211002.14},
      abstract = {The overarching purpose of this study was to use approaches from the Autoregressive Distributive Lag (ARDL) Model to uncover the causes of Ethiopia's trade balance. Ethiopia's economy was primarily reliant on earnings from the sale of primary commodities, focused on a small number of export commodities and market outlays to finance the importation of desperately needed capital goods. As a result, the country's exports failed, resulting in a persistent trade imbalance in international trade. As a result, the study concentrated on the key determinants of Ethiopia's trade balance, including the structure, value, volume, and direction of Ethiopia's export and import. The bound testing approach of Johansson co-integration test and error correction model was developed within the autoregressive distributed lag (ARDL) model framework, and annual data for the period 1990 to 2020 was used to investigate whether a short run and long run relationship exists between trade balance and its determinants. The main purpose of this paper was to show that lnFEA might show long-run negative and short-run positive trade balance relationships. lag trade balance, on the other hand, has a short-term positive relationship with trade balance, but REER has a long-term and short-term negative relationship with trade balance.},
     year = {2021}
    }
    

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    AU  - Alemayehu Temesgen Befikadu
    Y1  - 2021/12/24
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    DO  - 10.11648/j.jwer.20211002.14
    T2  - Journal of World Economic Research
    JF  - Journal of World Economic Research
    JO  - Journal of World Economic Research
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    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.jwer.20211002.14
    AB  - The overarching purpose of this study was to use approaches from the Autoregressive Distributive Lag (ARDL) Model to uncover the causes of Ethiopia's trade balance. Ethiopia's economy was primarily reliant on earnings from the sale of primary commodities, focused on a small number of export commodities and market outlays to finance the importation of desperately needed capital goods. As a result, the country's exports failed, resulting in a persistent trade imbalance in international trade. As a result, the study concentrated on the key determinants of Ethiopia's trade balance, including the structure, value, volume, and direction of Ethiopia's export and import. The bound testing approach of Johansson co-integration test and error correction model was developed within the autoregressive distributed lag (ARDL) model framework, and annual data for the period 1990 to 2020 was used to investigate whether a short run and long run relationship exists between trade balance and its determinants. The main purpose of this paper was to show that lnFEA might show long-run negative and short-run positive trade balance relationships. lag trade balance, on the other hand, has a short-term positive relationship with trade balance, but REER has a long-term and short-term negative relationship with trade balance.
    VL  - 10
    IS  - 2
    ER  - 

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Author Information
  • Department of Economics, Ambo University, Ambo, Ethiopia

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