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Is The Ethiopian Birr Overvalued? A Sober Assessment
Haile Kebret and Edris Hussien
Abstract
The objective of this paper is to assess whether the Ethiopian Birr is overvalued? If so, to what
extent? And what are the policy options, if any, that should be followed under such
circumstances? To do this an annual data from 1984 to 2013 is gathered and an Autoregressive
Distributed Lag (ARDL) model is estimated in the context of bounds testing. Appropriate data
diagnostics pre-and-post estimation tests are conducted to ensure result robustness, validation
and tracking performance of results. The estimated model shows that the Ethiopian Birr is
slightly overvalued as indicated by the spread between the nominal and the parallel exchange
rates but importantly between the actual and the estimated (equilibrium) real exchange rates. The
magnitude of the overvaluation is marginal (except the year when the domestic inflation was at
its peak).
The most sober policy conclusion the authors reached is that devaluing the currency at the
moment seems neither necessary nor useful as it is unlikely to improve the internal and external
(trade) balances of the country. This conclusion is based on the following: first, the spread
between the actual and the equilibrium exchange rates is minimal; second, our calculation shows
that the response of Ethiopian exports and imports to a change in exchange rate is very low or
inelastic; and, third, a minor spread does not necessarily call for a devaluation to improve
internal and external balance in economies like that of Ethiopia; and fourth, given the pervasive
information asymmetries, the net benefit of fine-tuning the exchange rate to correct minor spread
is uncertain in economies that are in transition.
Keywords: International finance, Exchange rate, appreciation, Ethiopia
The Elements of Business Process Change
Abebe Walle Meniberu*
Abstract
One of the tools used by governments to bring about organizational transformation is business
process change (BPC). The objective of BPC is to bring dramatic changes in the way
organizations conduct their business. Though the BPC concept seems to be conceptually
appealing, it has been reported by many scholars that BPC comes short of its expectations. This
study aimed at identifying and assessing the factors that contribute for successful implementation
of BPC projects in organizations of the developing country context. The factors identified as
important include the degree to which strategic business process changes are included in the
BPC project, level and complexity of problems encountered; the degree to which proposed BPC
objectives are being identified and incorporated in these change project plans and are actually
derived; and the impact of BPC endeavors on business processes and on the organization. The
study developed hypotheses about the BPC implementation process and the test results were
found to be consistent with the hypotheses. The result of the study revealed that organizations
give little attention to strategic processes critical to the very existence of the organization and
employees’ empowerment recommended in the BPC literature. While implementing BPC, the
most frequent problems seem to be very difficult to address such as communication barriers, the
unforeseen magnitude of the BPC effort, and its interruption to operations. Based on findings of
the study, conclusions are drawn and recommendations are made for practitioners to focus on
success factors such as top management commitment. Well organized BPC project team and
plans, focus on outcomes, sufficient resources and fund, well defined communications plan, team
spirit and good working environment.
Keywords: Business Process Change, Success Factors, BPC Outcomes
Tax Rates Effects on the Risk Level of Listed Viet Nam Wholesale and Retail
Firms during Global Economic Crisis 2007-2009
Dinh Tran Ngoc Huy*
Abstract
The emerging stock market in Viet Nam has been developed since 2006 and was affected by the
financial crisis 2007-2009. This study analyzes the impacts of tax policy on market risk for the
listed firms in the wholesale and retail industry as it becomes necessary. First, by using
quantitative and analytical methods to estimate asset and equity beta of total 9 listed companies
in Viet Nam wholesale and retail industry with a proper traditional model, we found out that the
beta values, in general, for many institutions are acceptable. Second, under 3 different scenarios
of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in
equity beta values, estimated at 0,603, 0,609 and 0,613. Third, by changing tax rates in 3
scenarios (25%, 20% and 28%), we recognized that both equity and asset beta mean values have
positive relationship with the increasing levels of tax rate. Finally, this paper provides some
outcomes that could provide companies and government more evidence in establishing their
policies in governance.
Keywords : beta, capital structure, economic crisis, risk, tax rate, wholesale and retail industry
Impact of Weather Index Insurance on Household Demand for Fertilizer in Tigray
Region
Desta Brhanu Gebrehiwot*
Abstract
Agriculture is a risky business. And Ethiopia is one of the few countries in the world that has been
ravaged by extreme drought for a number of years and stared its renaissance and development recently.
According to Wondifraw Zerihun et al. 2014 on their document regarding African Economic Outlook, in
2012/13 fiscal year, Ethiopia’s economy grew by 9.7%, the tenth year in a row of robust growth. In 2012,
Ethiopia was the twelfth fastest growing economy in the world. Average annual real GDP growth rate for
the last decade was 10.9%. Agriculture, which accounts for 42.7% of GDP, grew by 7.1, in order to
accelerate this economic growth and minimize the weather related agricultural shocks index insurance
program is being developed in Ethiopia. Hence the study aimed to investigate the impact of index
insurance on farmers demand for fertilizer by using panel data of HARITA project of 2010/11 household
survey in Tigray region. The study hypothesized that index insurance provision induces farmers to
increase fertilizer demand which is profitable, but risky. To achieve the objectives of the study both
descriptive and econometric techniques were used. The study employed random effects model with
difference- in- difference estimator to see the impact of index insurance on fertilizer demand. Amount of
fertilizer used was the dependent variable. Results of the random effect model showed that weather index
insurance has positive significance (at 10% level) impact on fertilizer demand. The sign of the variable
indicates that insurance purchaser’s fertilizer demand is more than that of non-purchasers. And
purchasing index insurance leads to increase demand for fertilizer by 33 percent. Therefore, the estimated
coefficient of the variable was positive sign as expected. Based on the result, the study recommends that
weather index insurance program should expand in all the drought prone areas of this region, then they
will become confident to adopt or increase fertilizer use, through this productive capacity and living
standard, the rural society will improve over time. Finally, this study is left open for further research as
index insurance is at its early stage in the study area, so there should be continuous follow up and research
on this area.
Keywords: difference-in-difference, Fertilizer, HARITA, Random effect, Weather index
insurance
Determinants of Key Account Management Effectiveness: The Case of Ethio
Telecom
Dires Abebe*
Abstract
Key account management (KAM) is one of the contemporary ways of maintaining enhanced
relationships with strategic business customers named as ‘key accounts’. It helps to build a
strategic relationship particularly in business-to-business marketing. But ‘what factors
determine KAM effectiveness’ is not much investigated. So, this study aims to address the
determinants of key account management effectiveness in the context of Ethio Telecom. A
conceptual model of factors that affect KAM effectiveness was developed and hypothesized.
The hypotheses were tested with data collected from key account department of Ethio
Telecom using structural equation modeling. The findings of this study show that from the
postulated seven determinants of KAM effectiveness (strategy, solution, people, management,
screening, government, and culture), the three (solution, management, and screening) were
found significant determinants. The scope of the study is limited to a single telecom operator
company in Ethiopia and analyzed from the perspective of the supplier. The findings provide
the empirical application of the KAM model theorized by Zupancic (2008) by incorporating
two additional external factors proposed to determine KAM effectiveness. The study
contributes to the improvement of KAM implementation in Ethio Telecom particularly.
Keywords: Key Accounts, Key Accounts Management, Key Accounts Management
Dimensions, Ethio Telecom