Analysis of the Ethiopian Agricultural Export Performance: A Dynamic Panel Model

Abstract

The main objective of the study was to examine the determinants of Ethiopian agricultural exports using a dynamic panel data approach. Specifically, the study assessed the trends, compositions, and the major destinations of Ethiopian exports and identified key determinants of the performance level of agricultural volume, value of export and systemic and operational bottlenecks of agricultural export. The study employed panel data of top 29 agricultural export commodities for the period 2000-2020. The selective commodities of agriculture were chosen on the basis of volume and value of export and availability of required data during the study period. Using the natural logarithm of agricultural export value of each commodity, and the selected demand and supply side determinant factors of agricultural export of the commodity-like lag of agricultural export commodity, RGDP, exchange rate, consumer price index, labor force, total road network coverage, corruption index, foreign direct investment, indirect tax revenue, total domestic saving, and trade openness were determined. The study identified all variables that were significant factors to determine agricultural commodity export. From these determining factors, lag of agricultural export, economic growth, Foreign Direct Investment, and terms of trade have positive and significant effects on agricultural commodity export at one-step system GMM. On the contrary, the remaining variables of exchange rate, labor force, gross domestic saving, road, indirect tax revenue, consumer price index, and corruption index have significant and negative effects on agricultural export. The study revealed that lowering corruption and indirect tax on export, and poor quality of the road, enhancing gross domestic saving would motivate private investment to engage in the export sector of the economy. Besides, controlling rapid population growth would decrease domestic consumption of exportable commodities and would increase export surplus. Finally, it is recommended that a concerted effort should be directed towards productive channels of agricultural commodity in the economy so as to enhance sustainable economic growth through increased agricultural commodity export.