On the Persistence of Shocks to Ethiopia's Terms of Trade: A Time Series Analysis

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Periodical article

Title:	On the Persistence of Shocks to Ethiopia's Terms of Trade: A Time Series Analysis
Author:	Naudé, Willem A.
Year:	1995
Periodical:	Eastern Africa Social Science Research Review
Volume:	11
Issue:	1
Period:	January
Pages:	59-72
Language:	English
Geographic term:	Ethiopia
Subjects:	terms of trade Economics and Trade
Abstract:	The paper deals with three aspects of Ethiopia's terms of trade. First, it presents an estimate of the impact of terms of trade volatility on the Ethiopian economy amounting to a cumulative loss of 542 million US dollars over the period 1971-1991. Second, using time series techniques of analysis the terms of trade volatility is decomposed into permanent and transient shocks. The analysis suggests that the negative growth component of Ethiopia's terms of trade is stochastic, implying a permanent nature of the shocks. And, third, using nonparametric methods, such as Cochrane's measure of persistence, and Bartlett's spectral density function, it is established that 99 percent of a terms of trade shock will have died out in Ethiopia after 20 years. Thus, the terms of trade shocks in Ethiopia, though not permanent, are of a long duration. Bibliogr., sum.