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The relationship between import and GDP growth in Ethiopia: an Empirical Analysis

Abstract: 

In this study, the effect of GDP growth on import, and the contribution of imported intermediate and capital goods to economic growth during the period 1960/61-1999/2000 in Ethiopia is studied. Cointegration and error correction mechanisms are used so as to separate the long run and short run relationship between import and GDP. The effect of imported intermediate and capital goods on economic growth (measured by real GDP) is also studied using the same procedure.

The estimated cointegrating vectors using Johansen's cointegrating approach indicates that the long run elasticity of imports with respect to real GDP is positive but it is insignificant at 5 percent level of significance. On the other hand, real international reserve is found to affect imports positively and significantly. However, the short run elasticity of imports with respect to real GDP is positive and significant. The policy implication of the short run high-income elasticity of imports is that policies of aggregate demand or stabilization may improve the balance of payment position.

The results of the estimation of imported intermediate and capital goods on economic growth indicate that in the long run imported intermediate goods positively and significantly affect real GDP growth. Similarly, in the short run, the change in imported intermediate goods before one year has a positive and significant effect on the change in current real GDP growth. On the other hand, imported capital goods have a negative effect on real GDP growth. This indicates that there is inefficient utilization of these goods in the production of goods and services.

Corporate Author: 
Alemayehu Seyoum ... [et al.] (editor)
Publisher: 
Ethiopian Economic Association (EEA)
Primary Descriptors: 

import ; Capital goods

Secondary Descriptor: 

GDP

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
Economic growth
Call Number: 
330.963 PRO 2005
Serial Key Title: 
Proceedings of the Second International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
II
Publication date: 
2013-05-27 23:05:00
Forum or Discussion date: 
2013-02-27 15:01:58
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy

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