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Determinants of bilateral trade flow between Ethiopia and its major trading partners: A gravity model approach

Author

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  • Tekalign, Firomsa Mersha
  • Mehare, Abule

Abstract

This study seeks to identify the internal and external factors determining Ethiopia’s bilateral exports and total trade flows. It uses panel data covering 21 major trading partners of Ethiopia from 2000 to 2017 and estimates an augmented fixed effects gravity model. The results reveal that domestic and foreign revenues increase Ethiopia’s bilateral exports, whereas the country’s foreign direct investment and the population size of the trading partners decrease bilateral exports. The results further show that both the domestic and foreign income and similarity endowment of Ethiopia increase the country’s total trade. The study provides recommendations for the effective implementation of supply side policies to enhance trade.

Suggested Citation

  • Tekalign, Firomsa Mersha & Mehare, Abule, 2023. "Determinants of bilateral trade flow between Ethiopia and its major trading partners: A gravity model approach," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 17(4), April.
    • Handle: RePEc:ags:afjare:333981
    DOI: 10.22004/ag.econ.333981
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    2. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
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