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Economic Implications of Foreign Exchange Rationing in Ethiopia

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  • Dorosh, Paul
  • Robinson, Sherman
  • Hashim, Ahmed

Abstract

Increases in foreign transfers and capital inflows helped spur Ethiopia’s economic growth in recent years, but also contributed to a real exchange rate appreciation that reduced incentives for production of tradable goods. Then, beginning in March 2008, following major external shocks, foreign exchange for imports was restricted to avoid excessive drawdown of reserves. This paper examines the implications of these shocks and policies using a Computable General Equilibrium (CGE) model of the Ethiopian economy. The results show that there are substantial costs to both foreign exchange rationing and real exchange rate appreciation in terms of economic efficiency and income distribution.

Suggested Citation

  • Dorosh, Paul & Robinson, Sherman & Hashim, Ahmed, 2009. "Economic Implications of Foreign Exchange Rationing in Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 18(2), pages 132-132, August.
    • Handle: RePEc:ags:eeaeje:249605
    DOI: 10.22004/ag.econ.249605
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    References listed on IDEAS

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    1. Dorosh, Paul A. & Dradri, Simon & Haggblade, Steven, 2009. "Regional trade, government policy and food security: Recent evidence from Zambia," Food Policy, Elsevier, vol. 34(4), pages 350-366, August.
    2. Dorosh, Paul A. & Sahn, David E., 2000. "A General Equilibrium Analysis of the Effect of Macroeconomic Adjustment on Poverty in Africa," Journal of Policy Modeling, Elsevier, vol. 22(6), pages 753-776, November.
    3. Dorosh, Paul A. & Thurlow, James, 2009. "Implications of accelerated agricultural growth on household incomes and poverty in Ethiopia," ESSP research notes 2, International Food Policy Research Institute (IFPRI).
    4. repec:fpr:esspwp:2 is not listed on IDEAS
    5. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
    6. Unknown, 2001. "General Discussion," Proceedings of the 6th Agricultural and Food Policy Systems Information Workshop, 2000: Trade Liberalization Under NAFTA: Report Card on Agriculture 16839, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
    7. Dorosh, Paul A. & Thurlow, James, 2009. "Implications of accelerated agricultural growth on household incomes and poverty in Ethiopia: A general equilibrium analysis," ESSP discussion papers 2, International Food Policy Research Institute (IFPRI).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. SENBETA, Sisay Regassa, 2013. "Foreign exchange constraints and macroeconomic dynamics in a small open economy," Working Papers 2013023, University of Antwerp, Faculty of Business and Economics.
    2. Dorosh, Paul A. & Rashid, Shahidur, 2012. "Food and agriculture in Ethiopia: Progress and policy challenges," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-81224-529-5 edited by Dorosh, Paul A. & Rashid, Shahidur.
    3. Paul Dorosh & Hashim Ahmed, 2012. "Foreign Exchange Rationing and Wheat Markets in Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 20(2), December.
    4. Ansah, Isaac Gershon & Gardebroek, Cornelis & Ihle, Rico & Jaleta, Moti, 2014. "Analyzing Developing Country Market Integration with Incomplete Price Data Using Cluster Analysis," 2014: Food, Resources and Conflict, December 7-9, 2014. San Diego, California 197169, International Agricultural Trade Research Consortium.
    5. Dorosh, Paul A., 2012. "The evolving role of agriculture in Ethiopia's economic development," IFPRI book chapters, in: Dorosh, Paul A. & Rashid, Shahidur (ed.), Food and agriculture in Ethiopia: Progress and policy challenges, chapter 11, International Food Policy Research Institute (IFPRI).
    6. Renkow, Mitch & Slade, Roger, 2013. "An assessment of IFPRI's work in Ethiopia 1995-2010: Ideology, influence, and idiosyncrasy," Impact assessments 36, International Food Policy Research Institute (IFPRI).
    7. Ansah, Isaac & Gardebroek, Cornelis & Ihle, Rico & Jaleta, Moti, 2015. "Analyzing Developing Country Market Integration using Incomplete Price Data and Cluster Analysis," 2015 Conference, August 9-14, 2015, Milan, Italy 210954, International Association of Agricultural Economists.
    8. Yami, Mesay & Meyer, Ferdi & Hassan, Rashid, 2016. "Testing price leadership role in major regional maize markets in Ethiopia," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249439, African Association of Agricultural Economists (AAAE).
    9. Díaz-Bonilla, Eugenio, 2016. "Volatile volatility: Conceptual and measurement issues related to price trends and volatility:," IFPRI discussion papers 1505, International Food Policy Research Institute (IFPRI).
    10. Ansah, Isaac Gershon K. & Gardebroek, Cornelis & Ihle, Rico & Jaleta, Moti, 2016. "Got data too poor for time series analysis? Can cluster analysis be a remedy? Studying wheat market integration in Ethiopia," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246442, African Association of Agricultural Economists (AAAE).

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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