Applied Economic Modeling And Forecasting (Fiscal Policy Analysis And Planning)

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Browsing Applied Economic Modeling And Forecasting (Fiscal Policy Analysis And Planning) by Author "Ferede, Tadele (PhD)"

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    The Impact of Foreign Aid on Government Expenditure in Ethiopia: An Application of Vector Error Correction Model
    (Addis Ababa University, 2014-06) Mohammed, Abas; Ferede, Tadele (PhD)
    Foreign aid represents an important source of finance in most countries in sub-Saharan Africa (SSA), where it increases government’s expenditure, supplements low savings, narrow export earnings and thin tax bases. In this paper, a welfare utility maximization function is used and the necessary diagnostic tests undertaken to determine how government spending respond to aid flows. It employs a co-integrated error correction model to account for potential endogeneity and non-Stationarity problems. The empirical results indicate that the flow of foreign aid does influence government spending patterns. It supports the hypothesis that in Ethiopia, during 1966 – 2013, foreign Aid has a positive effect on total government expenditure. Foreign aid is fungible in Ethiopia, it flows to unintended purpose. Disaggregating the data into capital and non- development expenditures, like general service expenditure and defense expenditure, the relationship has been examined. Capital expenditure is positively and significantly affected by foreign Aid and also Foreign Aid finances Non- developmental Expenditures. The study also provides evidence that policy change increases total and capital expenditures significantly. Taking into account Foreign aid influences government expenditures positively the government has to design effective strategy that enhances flow of foreign aid to the capital expenditure and protecting from non-developmental sectors.
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    Modeling and Forecasting Currency in Circulation in Ethiopia
    (Addis Ababa University, 2014-06) Semate, Getahun; Ferede, Tadele (PhD)
    In the literature, Currency in circulation is typically estimated either by specifying a currency demand equation based on the theory of transaction and portfolio demand for money or univariate time series models. The first approach works well with low frequency data but faces limitations with high frequency data series. Using monthly and weekly data of currency in circulation form May 2007 to April 2014, the paper proposes an alternative approach in modeling the high frequency data series by using Multivariate time series (structural model and VAR) univariate time series(trend and ARIMA) Model. The four separate models were estimated with monthly, and two separate models with weekly time series, assembling tools for forecasting trend, seasonal patterns and cycles in individual series separately. Trend and seasonal effects were identified by regressing on trend and seasonal dummies while cyclical dynamics were captured by allowing for ARMA effect in the regression disturbances. The monthly and weekly models clearly identify both intra –month and inter-month variation of currency in circulation. The monthly trend model also indentified that Ethiopian New Year has significant positive impact on demand for currency in Ethiopia. Finally model comparison result showed both monthly VAR, and trend models outperforms the structural and ARIMA models and trend model performs the weekly data wheel at 5% level of significance. In general this methodology may be used in forecasting currency in circulation with careful assessment of month to month and week to week current developments in the economy.
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    The Relationship between National Saving and Economic Growth in Ethiopia: ARDL and Granger causality Approaches
    (2016-06) Mesfin, Abel; Ferede, Tadele (PhD)
    Achieving a high and stable economic growth rate is an important issue for every country as economic growth is crucial for economic development. The objective of the paper is to investigate relationship between savings and economic growth in Ethiopia. The study analyzes the long-run causality between national saving and economic growth in Ethiopia‟s economy. Annual data for the period 1975-2013 is used; an Autoregressive Distributed Lag Model and Granger causality are attributed for the empirical results. The results of the study show that there is a negative and insignificant impact of savings on economic growth. In addition Granger causality test showed that there is a unidirectional causality from gross national product to national savings.