On The Causes Of Instability In Export Earnings

Author : James Love
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (141 download)

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Download or read book Export Instability written by James Love and published by . This book was released on 1975 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the widely-held propositions in the literature on the problems facing developing countries is that these countries experience short-term fluctuations in their export earnings which have adverse effects on their domestic economies. There is a strong prima facie case for this proposition. Several arguments point to an almost inevitable instability in proceeds from primary products, which account for a high proportion of total exports from the developing countries. Demand for primary products imported into the developed countries is, it is alleged, subject to frequent, sharp, short-term variations and the situation is aggravated by the low price elasticities of demand for such commodities. Moreover, variations in the world supply of individual primary products and the low price elasticities of supply appear to contribute to the instability in proceeds. Exports from the developing countries tend to be concentrated on a few markets or on a narrow range of primary commodities. Thus, fluctuations in earnings from one source need not be offset by compensating changes in proceeds from another source. Where exports represent a large part of national outputp significant fluctuations in export earnings may cause difficulties on several fronts. A developing country's ability to import capital equipment and other "input imports" essential to its growth efforts are determined principally by its export earnings. Export instability may introduce, therefore, uncertainties which hamper investment and domestic growth. Goverment revenues often depend heavily on the yields of taxes on foreign trade which may be strongly influenced by changes in export earnings. It follows that government expenditures may be subject to marked variations. Increases in incomes, consequent upon upward changes in export proceeds, may exacerbate inflationary tendencies by raising demand for both domestically produced and imported consumer goods, the supply of which tends to be price inelastic in the short-run. At the level of the individual peasant farmer, lower cash income, resulting from decreases in export earnings, may inflict considerable hardships, even starvation. Failure to prevent these consequences of export instability is usually ascribed to the absence of effective policy measures. This thesis is concerned with the question of export fluctuations in the context of the Ethiopian economy and its purpose is threefold. Firstly, it sets out to establish, using available data, the impact on the Ethiopian economy of changes in those variables which are conventionally thought to be affected by export fluctuations. Secondly, it attempts to identify those factors responsible for the export instability experienced by Ethiopia. This investigation involves a consideration of the importance of the various factors outlined above and of the emphasis customarily laid upon certain of these factors. The possible effects on fluctuations in Ethiopian export earnings of changes in tariff barriers and changes in international price competitiveness are also examined. Thirdly, those policy measures available to an individual government concerned with the problem of export instability are discussed in the light of the findings on the consequences and causes of changes in Ethiopian export proceeds.