Monday, June 17, 2013

NEVIS Review No 19 , Section I, Ref# 19.1

NEVIS Review No 19

Section I

Negadras Gebre-Hiwot Baykedagn
Ref# 19.1
June 17, 2013 

Ethiopian Macroeconomic Modeling in Historical Perspective: Bringing Gebre-Hiwot and His Contemporaries to Ethiopian Macroeconomics Realm
By Alemayehu Geda , PhD

Much of the macroeconomic analysis in Ethiopia is hardly linked to the country’s pioneer development thinkers. The latter, however, articulated the Ethiopian development problems and what should be the appropriate policy direction to address them nearly a century ago. This articulated development thinkers of the early 20thcentury Ethiopia had captured the imagination of prominent Ethiopian historians and their students. Ethiopian economists seem to lag behind in appreciating the theoretical insight of these pioneer development thinkers. This article is aimed at bridging this gap. The paper will, first, review the economic ideas of theses reformer-intellectuals and then build a linear model based on the synthesis of their development thinking. The model is then solved to render analytically solutions that will give theoretical insights on historic and contemporary macroeconomic issues in Ethiopia. I argue that some important development concepts such as the deterioration of the terms of trade of developing countries, the vicious circle of poverty and structuralist analysis of North-South macroeconomic interaction has, contrary to the statement in existing development literature, has its origin in early 20th century Ethiopian Development thinking.
Concluding Remarks
In this paper an attempt to analyze and synthesize the works of three pioneer Ethiopian development economists is made. The paper shows that these thinkers might be considered as pioneers in development economics. This is in particular true in their exposition of the terms of trade deterioration (which in the development economics literature is described as ‘the Prebishc-Singer hypotheses), the vicious cycle/circle of poverty, and creative adoption of European development model to conditions in developing countries. The latter view, which is referred as ‘safe modernization’ by these economists, also took Japan as its model.
On the basis of the idea of these development economists, a linear model is specified and partial equilibrium solutions are derived. The paper thus shows not only the origin of some basic tenets of development economics in Africa, but also the possibility of formalizing it in simple but logical framework. The model formulation, it is hoped, is also helpful to squarely focus on major development problems of Ethiopia at the turn of the early twenty century. Such modeling attempt is also helpful to document the history of development macroeconomics in general and model building effort in Ethiopia in particular. It is further hopped that this initial attempt in modeling could also be used as the basis for contemporary modeling exercise in Ethiopia. This is a logical approach since the problems analyzed by these pioneer development economists nearly a century ago are still very much relevant to the current condition in Ethiopia.

(Ed’ s note- Alemayehu Geda , PhD is Associate Professor in the Department of Economic in Addis Ababa University. His full paper can be accessed in his personal website: