Abstract:
Exports play an important role in an economy, influencing the level of economic growth,
employment and balance of trade. Hence, expanding export capacity and international
competitiveness are essential for rapid economic growth and development. This study is to
analyze the main determinants of supply and demand-side factors affecting export
performance of Ethiopia. The study employed a panel data analysis to empirically analyze
determinants of export performance of Ethiopia’s for the period of 2008 to 2020. A sample of
15 major trading partners was selected to analyze the determinants of total export. The panel
unit root test of Levin-Lin-Chu was used for each variable and applied the first difference
transformation for the variables that had a unit root. Based on the Hausman test the random
effect General Least Square gravity model was selected as an analytical tool to estimate the
determinant of export performance of Ethiopia’s. The results indicated that Gross Domestic
product of trade partner, Per capita Income of Trading Partner, Real Exchange Rate (RER),
trade openness, weighted distance and the variables institutional quality (CPI), had
significantly affected on export performance of Ethiopia’s. Based on the finding results, the
study recommends that there is a need to formulate policies and strategies that would promote
institutional quality, improve supply capacity, and strengthen trade liberalization, deepening
economic integration and targeting export destination that could reduce transportation costs
in order to improve the export performance of Ethiopia.
