| Abstract: | The structure of Ethiopian foreign trade sector is dominated by a few primary products that account for a lion's share of the country's export earnings, while the share of non-agricultural products in total merchandise exports is almost insignificant effect on economy. For the past three decades, primary agricultural products accounted the majority share of the merchandise export earnings of Ethiopia. Export of Ethiopia is increasing by average growth rate of 21% but has insignificant effect on economic growth of Ethiopia and the balance of payment is in deficit. The trend also reveals that Ethiopia’s export sector is mainly dominated by few primary commodities, where manufacturing exports account for less than 15% of merchandise exports on average. The results from unit root test show that all variables are order one integrated; and Johansen cointegration shows the existence of long run relations among the variables. The result further explained that agricultural export commodities are the dominant factors of external income of Ethiopian export growth is at infant level and has insignificant effect on economic growth and however, growth stimulate export in the long run. The significant and negative coefficient indicates the relative speed of adjustment to achieve the long run equilibrium. In all the cases Ethiopian export performance has affected with the variables of gross domestic product, exchange rate, infrastructure and share of trade have significant positive effect on the improvement of export performance on both agricultural and manufacturing export performance and have long run relationship. Whereas, foreign direct investment, inflation rate and terms of trade has negative effect on Ethiopian export performance. Based on the findings the agricultural and manufacturing goods has low share to real GDP of Ethiopia, hence the government should strengthen the two main sectors for economic growth of the country. |
