Bibliography:

Lelissa, T. B. (2015). Causes for Foreign Currency Liquidity Gap: a Situation Analysis of the
Ethiopian Economy. Journal of Poverty, Investment and Development, 15.

Introduction:

The introduction of the research tries to elaborate the foreign currency liquidity gap experienced
for several years in Ethiopia. According to the researcher, these ups and downs have led the
nation to a shortage of foreign exchange reserves.

This situation has had a significant impact on the country's economic growth and development.
Therefore, this research aims to identify the causes of the foreign currency liquidity gap in the
Ethiopian economy. The introduction provides a clear and concise overview of the topic,
highlighting the importance of understanding the causes of foreign currency liquidity gap in
Ethiopia.

Objective:

The researcher tried to analyze the causes of the foreign currency liquidity gap in the Ethiopian
economy as the main objective of the study.

The objective of this study was to identify the causes of foreign currency liquidity gap in the
Ethiopian economy. The study aimed to provide insights into the factors that contribute to the
foreign currency liquidity gap and to suggest possible policy measures to address the issue.

The objective of the study is clearly stated and aligns with the research question.

Methodology:

This research is a qualitative study that utilizes a situation analysis approach. The researcher
conducted an extensive review of academic literature related to the Ethiopian economy and its
foreign currency liquidity gap. The literature review was conducted using multiple databases
such as Google Scholar, Scopus, and Web of Science. The researcher identified 15 relevant
articles that were analyzed to identify the causes of the foreign currency liquidity gap in the
Ethiopian economy.

The study used a combination of qualitative and quantitative methods to analyze the causes of
foreign currency liquidity gap in Ethiopia. The data for the study was collected through
interviews with key stakeholders in the Ethiopian economy, as well as through a review of
relevant literature.
The use of both qualitative and quantitative methods allowed for a more comprehensive analysis
of the issue. Some may argue that the reliance on secondary data sources limits the depth and
accuracy of the findings.

Finding:

The findings of this study suggest that there are several causes of the foreign currency liquidity
gap in the Ethiopian economy. These causes include a large trade deficit, limited export
diversification, a lack of foreign direct investment, and limited access to international financial
markets.

One of the key causes identified in this study is the large trade deficit. Ethiopia's imports have
consistently exceeded its exports, leading to a shortage of foreign exchange reserves.
Additionally, Ethiopia's export base is limited, with coffee accounting for the majority of its
exports. This lack of export diversification further exacerbates the country's foreign currency
liquidity gap.

Another cause identified in this study is a lack of foreign direct investment. Ethiopia has limited
foreign direct investment due to a variety of factors, including political instability, limited
infrastructure, and a challenging business environment. This limits the inflow of foreign currency
into the country, contributing to the foreign currency liquidity gap.

Finally, the study identifies limited access to international financial markets as a significant
cause of the foreign currency liquidity gap. Ethiopia has limited access to international financial
markets due to its low credit rating and limited financial sector development. This limits the
country's ability to borrow foreign currency and manage its foreign exchange reserves
effectively.

The study found that the main causes of foreign currency liquidity gap in Ethiopia were the
country's trade deficit, low export earnings, and high import demand. Other factors that
contributed to the foreign currency liquidity gap included the country's limited access to foreign
exchange reserves, weak institutional frameworks, and inadequate foreign investment inflows.

The study's findings are supported by other research on the subject, which also identifies
Ethiopia's trade deficit, low export earnings, and high import demand as key factors contributing
to the foreign currency liquidity gap (Ghebreyesus, 2018).However, Some may argue that the
study does not fully explore the impact of external factors such as political instability or natural
disasters on Ethiopia's foreign currency liquidity position.
Strength:

This research provides a comprehensive analysis of the causes of the foreign currency liquidity
gap in the Ethiopian economy. The study utilizes a situation analysis approach, which allows for
a detailed examination of the country's economic situation. Additionally, the study draws on a
wide range of academic literature, providing a robust analysis of the issues at hand.

One of the strengths of this study was its comprehensive analysis of the various factors that
contribute to the foreign currency liquidity gap in Ethiopia. The study also provided valuable
insights into the policy measures that could be taken to address the issue and improve the
country's foreign currency liquidity position

The study's comprehensive analysis of the various factors contributing to the foreign currency
liquidity gap provides valuable insights for policymakers. Some may argue that the study's
policy recommendations are not feasible or effective in addressing the issue.

Weakness:

This research is limited by its qualitative nature. While the situation analysis approach provides a
detailed examination of the country's economic situation, it does not allow for statistical analysis
or quantitative modeling. Additionally, the study relies solely on academic literature, which may
not capture all relevant factors contributing to the foreign currency liquidity gap in the Ethiopian
economy. Further research utilizing both qualitative and quantitative methods is needed to
validate these findings and identify additional strategies for addressing the foreign currency
liquidity gap in the Ethiopian economy.

One of the limitations of this study was its reliance on secondary data sources, which may have
limited the depth and accuracy of the findings. Additionally, the study did not explore the
potential impact of external factors such as global economic conditions on the foreign currency
liquidity gap in Ethiopia.

The study's reliance on secondary data sources may limit the depth and accuracy of the findings.
However, some may argue that the study's limitations are outweighed by its valuable
contributions to understanding the causes of foreign currency liquidity gap in Ethiopia.