The Impact of Export Volatility on the Growth of Ethiopia: A GARCH Model Approach
Year: 2024
Type: article
Abstract: Export volatility is a hot issue in any developing country's economic growth. This study examinesexport volatility and its long-term impact on Ethiopia's economic growth. Employing quarterlydata from 1991 to 2014, the study uses the Generalized Autoregressive ConditionalHeteroskedasticity (GARCH) model and Extended Cobb-Douglas Production Growth Models.According to the estimation result of the GARCH (1, 1) model, the volatility index negativelyaffects Ethiopia's economic growth. Moreover, the previous day's volatility of export price andvolume can influence the current day's volatility of both export price and volume. The resultsfrom the extended Cobb-Douglas production model show that both the export price and volumevolatility indexes negatively impact long-run economic growth. As a solution, the studysuggested that the country should switch from making low-quality goods to making high-qualitygoods and exporting a more comprehensive range of goods with a competitive edge. Moreover,there should be price-based stabilization through price-oriented diversification and replacingprimary products with industrial exports is fundamental to the realization of sustained economicgrowth in Ethiopia.
Authors: Ahmed, Nurhussen, Eshete, Zerayehu Sime
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7217831716
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