EFFECT OF EXPORT ON ECONOMIC GROWTH IN ETHIOPIA

ABSTRACT Export has heavily contributed to foreign earnings in the country. This study is aimed to investigate the effect of export on economic growth in Ethiopia. Export data during the period 1990/91 - 2021/22 were obtained from secondary data of National Bank of Ethiopia, Central Statistical Agency of Ethiopia, Ministry of Finance and Economic Development of Ethiopia. Explanatory variables namely Total export(EX), Political stability(PoStab),Tax on export(TaEX),Trade openness(TOP),Real Effective Exchange Rate(REER),Trade Balance(TB),Transport Service(TService) and Foreign Direct Investment(FDI) were regressed using the Autoregressive Distributed Lag (ARDL) model. Granger causality method was used to test the direction of causality between export and economic growth. The long run results obtained indicated that export has positive and significant effect on economic growth of Ethiopia. In the short run, export has significant effect on economic growth. The result from econometric analysis revealed that the GDP and TOP significantly and positively affect export. Thus, increasing quality of export product and quantity of export product would bring a vital outcome for increasing its export performance. To improve the export trade and quality of export product, the government should adopt modern machines and technology, provide adequate inputs and ensure availability of credit.