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Addis Ababa University Libraries Electronic Thesis and Dissertations: AAU-ETD! >
Faculty of Business and Economics >
Thesis - Economics >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/123456789/3202
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| Title: | THE IMPACT OF REAL EFFECTIVE EXCHANGE RATE ON THE ECONOMIC GROWTH OF ETHIOPIA |
| Authors: | FENTAHUN, BAYLIE |
| Advisors: | Dr. Gebrehiwot Ageba |
| Keywords: | Real effective exchange rate, economic growth. |
| Copyright: | Feb-2011 |
| Date Added: | 26-Jun-2012 |
| Publisher: | AAU |
| Abstract: | This study analyzes the impact of real effective exchange rate on the Ethiopian economy
using annual time series data for the period 1970-2009. With the help of cointegration and
vector error correction analysis, the impact of real effective exchange rate on real gross
domestic product growth was assessed in the long-run as well as in the short-run. The study
found that the impact of real effective exchange rate on economic growth works through the
aggregate demand channel in the short-run and the aggregate supply channel in the long-run
i.e. decrease/depreciation in the value of the domestic currency promotes economic growth
only in the short-run. In the long-run, it discourages economic growth. The study also found
that the government, through its spending, may play a key role in bringing about economic
growth in Ethiopia. Government expenditure is found to be equally statistically significant to
real effective exchange rate in explaining economic growth in Ethiopia. Other variables like
real interest rate and real exchange rate premium are also found to be statistically significant
with the expected sign in explaining economic growth in the long-run. The study confirms
that the country is on the right truck to go for a long-term economic growth as the
[appreciation of] real effective exchange rate and [increase in] public expenditure are the
most important tools of economic growth in the hand of the government. With the use of at
least these two tools, the government may play a key role in transforming the agrarian
economy. |
| Description: | A Thesis Submitted to the School of Graduate Studies of
Addis Ababa University in Partial Fulfillment of the Requirements for the
Degree of Masters of Science in Economic |
| URI: | http://hdl.handle.net/123456789/3202 |
| Appears in: | Thesis - Economics
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