The objective of this study is to analyze the structural and behavioral attributes of a small and open subsistence economy. Using a medium-sized macroeconometric policy model, the study analyses specific structural factors and internal rigidities facing the Ethiopian economy and examines the impacts of various past and recent policies implemented by successive governments. The study addresses the question of the applicability of macroeconometric models for developing countries and uses such a model to examine the structural and institutional peculiarities of a subsistence economy. This study also presents the first macroeconometric policy model of Ethiopia. This model is used to examine the supply constraints and the importance of the exchange rate on the economy. Further the study will attempt to examine the impact of alternative macro policies on the performance of the economy and provide a quantitative framework for further policy analysis. The specific policy issues examined include: One, how was the performance of the Ethiopian economy affected by the policy shift of the mid-seventies? Two, what is the likely impact of the recently implemented devaluation of the domestic currency (birr) on the balance of payments and other economic aggregates? And, three, is there a trade-off between military expenditures and social programs? The key findings are summarized below. Devaluing the currency would: One, have an adverse impact on output growth and, hence, on components of aggregate demand--on private consumption expenditures and on private investment, for instance; two, be inflationary, as would be expected for a small (price taking) open economy; but, three, it would have a positive impact on the current account balance. A reduction in military expenditures: One, would increase total output, and would have a positive net impact on private consumption and investment expenditures; two, suggests the existence of a significant trade-off between military expenditures and expenditures on education and health; and, three, would improve the current account balance since most of the military equipment is imported. No change in policy in the mid-1970s would have: One, increased total output and sectoral outputs, and would have had a positive net impact on private consumption and investment expenditures; two, increased expenditures on education and health; but, three, would have decreased most imports and exports and would have had a net positive impact on the current account balance. (Abstract shortened by UMI.)
| Identifer | oai:union.ndltd.org:uottawa.ca/oai:ruor.uottawa.ca:10393/9469 |
| Date | January 1996 |
| Creators | Taye, Haile Kebret. |
| Contributors | Bodkin, Ronald G., |
| Publisher | University of Ottawa (Canada) |
| Source Sets | Université d’Ottawa |
| Detected Language | English |
| Type | Thesis |
| Format | 195 p. |
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