Asymmetric impact of exchange rate on trade balance in Ethiopia: Evidence from a non-linear autoregressive distributed lag model (NARDL) approach.

ABSTRACT: Ethiopia has persistently pursued exchange rate devaluations to address its trade deficit and the structure of the economy, a strategy supported by the United Nations and economists. However, the effectiveness of this policy shift has sparked prolonged debate among scholars, exacerbated by divergent findings regarding the effect of exchange rates on trade balances. This study investigates the asymmetric effect of the real exchange rate on Ethiopia's trade balance from 1992 to 2022. Employing the Non-linear Autoregressive Distributed Lag Model (NARDL), the research challenges the prevalent assumption of a linear (symmetric) association between exchange rates and trade balances in Ethiopian studies. Results reveal asymmetric effects of the exchange rate on the trade balance in both the short

SUBMITTER: Abegaz BE 

PROVIDER: S-EPMC11620385 | biostudies-literature | 2024

REPOSITORIES: biostudies-literature