Instability of Ethiopia’s Export Earnings, Prices and Quantities

Abstract

This article examines Ethiopia’s instability in export earnings, prices and quantities of the major export commodities over the period 1964-2002. Analysis of the composition of exports through time reveals that Ethiopia has not diversified the commodity structure of its exports in that its export earnings depend on only a few agricultural products. In fact, the results of this study show that six agricultural commodities (chat, coffee, fruits and vegetables, hides and skins, oilseeds, and pulses) accounted for about 86% of the total export earnings of the country. The results indicate that the amplitude of instability varied from one commodity to another. Moreover, the results show that for the major export commodities, except for coffee, domestic supply factors were more important in explaining instability in earnings than demand related factors. The findings of this study suggest that the country needs to break away from its heavy dependence on traditional export commodities for which it is a marginal exporter, thus a price taker.