How Important are Commodity Terms of Trade Shocks in Explaining Government Tax Revenue Fluctuations? Evidence from Ethiopia

Naser Yenus Nuru

Global Journal of Emerging Market Economies, 2025, vol. 17, issue 1, 137-152

Abstract: Using a new database of commodity terms of trade and identifying country-specific commodity export and import price shocks separately, this article mainly aims to examine the importance of commodity export and import price shocks in explaining government tax revenue fluctuations using Ethiopia as an example over the sample period 1980–2019. This article employs a structural vector autoregressive model and forecast error variance decomposition analysis to address this objective. The results show that commodity export and import price shocks account for around 48% of government tax revenue fluctuations. While commodity export price shocks contribute to around 37% of fluctuations in government tax revenue, commodity import price shocks account for only 11% of government tax revenue fluctuations. These findings are discussed in terms of their policy implications. JEL Classification C32, F41, F44

Keywords: Commodity terms of trade; government tax revenue; structural vector autoregressive; forecast error variance decomposition; Ethiopia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emeeco:v:17:y:2025:i:1:p:137-152

DOI: 10.1177/09749101241276394

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