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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/3505

Title: RELATIVE EFFECTIVENESS OF MONETARY AND FISCAL POLICIES ON ECONOMIC GROWTH IN ETHIOPIA: VECTOR AUTOREGRESSION APPROACH
Authors: Teweldebrehan, Tesfay
Advisors: Dr. Hussien Hamda
Keywords: economics
Copyright: Jun-2010
Date Added: 27-Jul-2012
Publisher: AAU
Abstract: The study empirically investigates the relative effectiveness of fiscal and monetary policies on economic growth in Ethiopia. With the objective of finding out the relative strength of monetary and fiscal policies on economic growth, the study used an unrestricted vector autoregressions (VARs) framework, based on the St. Louis equation, to compute variance decompositions (VDCs) and impulse response functions (IRFs). Neither government expenditure nor money supply (M2) was found to be statistically significant in the co-integrating equations estimated suggesting that the policy variables are neutral in the long run. The results derived from the VDCs and IRFs imply that monetary policy alone has a significantly positive impact on GDP growth in Ethiopia. However, the impact of fiscal policy on GDP growth remains broadly insignificant. The outcome of this study, thus, supports the views of the proponents of the St. Louis Model that monetary policy is relatively more effective than fiscal policy in stimulating economic activity.
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 Economics (Economic Policy Analysis) in the School of Economics
URI: http://hdl.handle.net/123456789/3505
Appears in:Thesis - Economics

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