Corruption is considered the major barrier to development. Recent empirical studies have identified a strong, positive linkage between higher perceived corruption and lower economic growth (Mauro, 1995). African countries have long been hindered by corruption and Ethiopia is not an exception.
All by Vincent Z. Yu
Ethiopia Industrial Policies Part 2: Importance of Private Entrepreneurship in Export-Oriented Strategies
In part 1 of our discussion, we talked about how import-substituting strategies have their unique and crucial contributions to the progress of a developing country, like Ethiopia. Domestic control over far-reaching input capital goods, such as cement, metal, natural resources, etc. provides robust support to virtually all other industries. Contrary to import-substituting policies, export-oriented ones provide fast rides to advanced technologies, mature management, and a larger market, though at a high cost of local control and path certainty.
Ethiopia Industrial Policies Part 1: Value of Import-Substituting Industrial Policies
Ethiopia is one of the few countries in Africa that pursues an active and comprehensive industrial policy. Ethiopia is looking to position itself as the new low-cost manufacturer of the world. To achieve its goal, Ethiopia needs proper industrial policies consideration which comprise “more particular facts than any brain could ascertain or manipulate” (Hayek 1973). The objective of the “Industrial Policies Series” is to examine current outcomes of Ethiopia’s endeavor to identify key elements in the Ethiopia-specific complexity that are pivotal to both success and failure. Targeted sectors used for our examinations are the leather sector, horticulture sector, and cement sector. In part A, a comparison between the leather, horticulture sector and the cement sector will be made to stress on the value of import-substituting policies.
Fixed Foreign Exchange Rate Regime
There are two major types of foreign exchange regimes: fixed exchange rate policy and floating. As its literal meaning on appearance, a fixed exchange rate is a regime in which a country’s currency exchange rate is tied to the currency of another country or the price of gold. A floating exchange rate policy, instead, gives the currency a much wider range to float without predominant regulatory control. The price of a particular currency in this scenario is almost purely driven by the relative supply and demand of the currency in the foreign exchange market. We will define the exchange rate in our discussion as the rate at which a domestic currency can be converted to one unit of U.S. Dollar, the value of which is assumed unchanged, we will now proceed with our discussion of the fixed-rate system.
Land Reform in Venezuela -- Developmental Economics Analysis on Property Rights, Part A
In Venezuela, the discovery of oil was an excitement for the fast and easy track it paved to wealth. Venezuela’s agricultural industry, on the other hand, was largely neglected due to over-emphasis on the oil industry. Such a tilted policy design deepened the tremendous gap between rural and urban areas, with only 12% of its population living in the rural area who produces food insufficient for the whole nation (Wilpert, 2007). Nevertheless, the greater demand for food did not fuel the welfare of the most fundamental supplier group – the farmers. Instead, it filled up the pocket of the elite class, the latifundista, as they had overwhelming property control over the key resources. Misallocation of property rights not only hinders the production power of the traditional farming class, it also causes a vicious cycle where incentives for relevant activities are nowhere to be found.
Quantitative Easing: Its Mechanism, Aftermath, and Evaluation
While conventional monetary policies involve mild modifications of various metrics, unconventional policies are aggressive endeavors for a short-term major impact. Quantitative Easing (QE) is a major component of it, envisioned more than a decade ago for strong stimulation of a distressed economy. QE refers to large-scale purchases of securities, through which central banks directly pump a tremendous amount of cash into the market. For example, the Fed had already reduced the federal funds rate to zero in 2008 amid economic deterioration. While some European countries pushed down the rate to its negative, the Fed announced a plan of buying mortgage-backed securities and debt issued by government-sponsored enterprises. This was the beginning of the five-year long expansion period for the Fed’s balance sheet as well as the debate over QE and its application.
Ethiopia Industrial Policies Part 2: Importance of Private Entrepreneurship in Export-Oriented Strategies
In part 1 of our discussion, we talked about how import-substituting strategies have their unique and crucial contributions to the progress of a developing country, like Ethiopia. Domestic control over far-reaching input capital goods, such as cement, metal, natural resources, etc. provides robust support to virtually all other industries. Contrary to import-substituting policies, export-oriented ones provide fast rides to advanced technologies, mature management, and a larger market, though at a high cost of local control and path certainty.
Ethiopia Industrial Policies Part 1: Value of Import-Substituting Industrial Policies
Ethiopia is one of the few countries in Africa that pursues an active and comprehensive industrial policy. Ethiopia is looking to position itself as the new low-cost manufacturer of the world. To achieve its goal, Ethiopia needs proper industrial policies consideration which comprise “more particular facts than any brain could ascertain or manipulate” (Hayek 1973). The objective of the “Industrial Policies Series” is to examine current outcomes of Ethiopia’s endeavor to identify key elements in the Ethiopia-specific complexity that are pivotal to both success and failure. Targeted sectors used for our examinations are the leather sector, horticulture sector, and cement sector. In part A, a comparison between the leather, horticulture sector and the cement sector will be made to stress on the value of import-substituting policies.
Fixed Foreign Exchange Rate Regime
There are two major types of foreign exchange regimes: fixed exchange rate policy and floating. As its literal meaning on appearance, a fixed exchange rate is a regime in which a country’s currency exchange rate is tied to the currency of another country or the price of gold. A floating exchange rate policy, instead, gives the currency a much wider range to float without predominant regulatory control. The price of a particular currency in this scenario is almost purely driven by the relative supply and demand of the currency in the foreign exchange market. We will define the exchange rate in our discussion as the rate at which a domestic currency can be converted to one unit of U.S. Dollar, the value of which is assumed unchanged, we will now proceed with our discussion of the fixed-rate system.
