How Important are Commodity Terms of Trade Shocks in Explaining Government Tax Revenue Fluctuations? Evidence from Ethiopia
Year: 2024
Type: article
Abstract: Using a new database of commodity terms of trade and identifying country-specific commodity export and import price shocks separately, this article mainly aims to examine the importance of commodity export and import price shocks in explaining government tax revenue fluctuations using Ethiopia as an example over the sample period 1980–2019. This article employs a structural vector autoregressive model and forecast error variance decomposition analysis to address this objective. The results show that commodity export and import price shocks account for around 48% of government tax revenue fluctuations. While commodity export price shocks contribute to around 37% of fluctuations in government tax revenue, commodity import price shocks account for only 11% of government tax revenue fluctuations. These findings are discussed in terms of their policy implications. JEL Classification C32, F41, F44
Author: Naser Yenus Nuru
Institution: Woodrow Wilson International Center for Scholars
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4402634049