Devaluation and Export Performance Essay -- Economics

Agriculture plays a vital role in the Ethiopian economy, contributing 42 percent of Gross Domestic Product (GDP), 80 percent of the employment and 90 percent of total exportation lucre (Ministry of Finance and Economic Development MoFED 2011 Diao et al. 2010). In 2009 with an effort to remove the reprehensible socio-economic circle, the government of Federal Democratic Republic of Ethiopia (FDRE) developed a suppuration and Transformation Plan (GTP) with a priority to export orientated rude development to lead industrialization (MoFED 2010 P. 22). Despite the over-ambitious plan, however, the performance of the export sector has remained undeveloped which calls for sound macroeconomic policies that ar crucial to combat the bottlenecks throttle the export sector. Foreign exchange rate is a key macroeconomic variable that determines performance of export in a country. The causes why export performance depends on the foreign exchange regime in develop countries include the chara cteristics of exportable goods, the effectiveness of fiscal sectors and trading with foreign currencies quite a than with the domestic currency (Nilsson K. and Lars N. 2000). Accordingly, Ethiopias export is characterized by primary agricultural products with inflexible export demand and supply, concentration of market and products, little value addition. The pass of primary agricultural product export is a smaller marketing margin and insignificant bargaining power on the world market. The financial sector is also constrained with higher probabilities of the existence of parallel markets that flush it at allocating resources to their most efficient usage. Moreover, all trade transactions are carried out with foreign currencies, predominantly with US... ... 2011. The Dynamics between Real veer Rate Movements and Trends in TradePerformance The Case of Ethiopia. Munich Personal RePEc (Research Papers in Economics). Munich. Michael, Nwidobie Barine. 2011. An allude Analysis o f Foreign Exchange Rate Volatility on Nigerias Export Performance. European Journal of Economics, Finance and Administrative Sciences Issue 37 (September) 47-55.National Bank of Ethiopia (NBE). 2011. National Bank Annual Report 2009/10. Addis Abeba NBE. http//www.nbe.gov.et/publications/annualreport.htm (Accessed on Apri 25, 2012).Nilsson, Kristian and Lars Nilsson. 2000. Exchange Rate Regimes and Export Performance in Developing Countries. Oxford Blackwell Publishres 331-349.The introduction Bank (WB). 2012. World Development Indicators Ethiopia. WB. http//data.worldbank.org/country/ethiopia (Accessed on April 26, 2012).