Modeling and Simulation of Ethiopian Wooden Furniture Market

Abstract

The manufacturing sector in Ethiopia operates at very low Productivity and technology. The cause to this problem can be rooted and explained through Demand and Supply analysis which helps to identify whether the capacities to meet different domestic or international requirements have to be improved and/or the extent to which existing or potential demand could absorb possible supply expansion. This type of research has never been undertaken in Ethiopian wooden Furniture products as far as my knowledge is concerned. It is under this assumption that research proposal was conceived to be undertaken. Therefore, the general objective of this study was to build a Dynamic simulation model for the demand and supply of wooden Furniture products in Ethiopia. The model development was based on CSA database. The dependent variables are the National Yearly aggregated values of domestic wood furniture product Produced and consumed, whereas the independent variables are: The prices of Domestic and imported Lumber and Boards, wood furniture products and the level of Consumers’ Money income. The general techniques for Simulating Continuous Random Numbers were used to simulate the demand and supply as continuous random variables using an up-to-date econometrics software package (Stata 12). Based on the analyzed model, the immediate marginal effect (the impact effect) of per capita income on the consumption expenditure of wooden furniture is 0.907 where as its dynamic marginal effect is 0.721 and its long run cumulative effect of per capita income on the consumption expenditure of Wooden Furniture is found to be 1.628. Similarly the immediate marginal effect (the impact effect) of the value (price) of wooden furniture is -0.064 where as its dynamic marginal effect is 0.251 and its long run cumulative effects of value (price) of Wooden Furniture are found to be 0.187. On the other hand the lag of demand has positive significant dynamic effect on the consumption expenditure of wooden furniture this is mainly due to the unsatisfied demand in the previous year encourage output adjustments.