This study investigates the short- and long-run effects of exchange rate fluctuations on Ethiopia’s export earnings and overall economic performance from 1990 to 2025 using the Autoregressive Distributed Lag (ARDL) framework. Annual macroeconomic data, real GDP, export earnings, foreign exchange rate, inflation, foreign direct investment (FDI), and domestic consumption, were analyzed after confirming variable integration at order I(1). The bounds test results indicate a strong long-run co integrating relationship among the variables. Empirical findings show that exchange rate movements have a significant impact on real GDP in both the short- and long-run. FDI and inflation also have meaningful positive effects. Export earnings show a mixed pattern. There are negative short-run adjustments, followed by stability in the long run. The Granger causality tests reveal no directional causality between export earnings and real GDP. This suggests that structural constraints weaken the link between export performance and economic growth. However, export earnings are found to Granger-cause the exchange rate. This shows the exchange rate’s sensitivity to changes in the external sector. Overall, the study highlights that a competitive and well-managed exchange rate is important for strong export competitiveness and economic growth. Policy measures should promote export diversification, value addition, and stable macroeconomic conditions. Attracting export-oriented FDI is also key to strengthening Ethiopia’s long-term economic resilience.