Abstract:
This paper examines the effect of preferential trade agreement, especially African Growth and
Opportunity Act, on selected macroeconomic variables, such as export, trade balance, and foreign
exchange reserve. The study covers 40 years of time series data, starting from 1981 to 2020,
collected from NBE and World Bank database. The data is analyzed using ARDL model to get long
run and short run relationship between AGOA among selected variables. The results largely
indicate that AGOA preferences for Ethiopia has a positive and significant impact on all out come
variables, namely, total export, foreign exchange reserve and trade balance of Ethiopia. The
implication of these findings is that the recent termination of AGOA scheme would have
detrimental adverse effect on the overall exports, reserve and trade balance of Ethiopia. Hence
the government should search for other alternative preferential trade unions. Moreover, strong
political commitment is a key if Ethiopia is to access new export destinations and/or rejoin AGOA scheme, among others
