Determinants of Ethiopian sesame and coffee exports to its major trade partners: application of the gravity model

Using the gravity model as a theoretical framework and the two-step system generalized moment method (GMM) as an analytical model, this article investigated the drivers of Ethiopian sesame and coffee exports to its key trading partners for the period 2005-2021. The descriptive results revealed that few price, and income inelastic agricultural commodities, such as coffee, oilseeds, and pulses, account for more than half of Ethiopia's export revenues. On average, 33.7, 36.9, and 19.4% of Ethiopia's total exports were channeled to European, Asian, and African nations, respectively, in the period 2010-2021. The regression results of the two steps GMM showed that the foreign direct investment of Ethiopia, the gross domestic product of Ethiopia, and partner countries are positively and significantly related to the volume of Ethiopian sesame export. However, the official exchange rate, trade openness, and population of Ethiopia are negatively and significantly related to the volume of Ethiopian sesame and coffee exports. The weighted distance and the volume of Ethiopian sesame exports are negatively and significantly related in this study. The findings support the prediction of the gravity model. Ethiopian agricultural exports will be increased through encouraging domestic output growth, foreign direct investment, population control, and diversification of export destinations. Though international trade is the engine of economic growth, the percentage share of Africa in international trade has remained below 3%. The majority of trade theories, including the absolute advantage theory, the comparative trade theory, the Heckscher-Ohlin theory, the preference similarity theory, and the new trade theory have focused on the factors that influence the volume of international trade between exporting and importing partner countries. However, the gravity model explains the variables influencing the volume of trade flows between countries. This study, therefore, aimed to identify the determinants of Ethiopian sesame and coffee exports using the gravity model as a theoretical framework and the two steps system generalized moment method as an analytical model.