This article examines Ethiopia’s instability in export earnings, prices and quantities
of the major export commodities over the period 1964-2002. Analysis of the
composition of exports through time reveals that Ethiopia has not diversified the
commodity structure of its exports in that its export earnings depend on only a few
agricultural products. In fact, the results of this study show that six agricultural
commodities (chat, coffee, fruits and vegetables, hides and skins, oilseeds, and
pulses) accounted for about 86% of the total export earnings of the country. The
results indicate that the amplitude of instability varied from one commodity to
another. Moreover, the results show that for the major export commodities, except
for coffee, domestic supply factors were more important in explaining instability in
earnings than demand related factors. The findings of this study suggest that the
country needs to break away from its heavy dependence on traditional export
commodities for which it is a marginal exporter, thus a price taker.
