Abstract

Hailegiorgis Bigramo Allaro, Belay Kassa and Bekele Hundie

This research examines the structural break dates for export, import and GDP in Ethiopia using annual macroeconomic time series data spanning the years from 1974 through 2009. The study revealed that Ethiopia economy has been subject to a structural change and regime shift during the sample period. This paper reviews tests for structural change in linear regression models with Chow test which was formalised from Perron (1989) to perform tests on time series data on three assumed dates 1992, 1993 and 2003 to determine the date(s) at which there was a statistically significant structural break. The study infers that endogenously determined structural break time for the macroeconomic variables (export, import and GDP) of Ethiopian economy was found to be 2003. Noteworthy is that the structural break occurred after eleven years of the regime shift suggesting the policy change is not corresponding with the anticipated structural break in Ethiopian economy. This implies that structural break taken place endogenously well after policy announcement.