School of Commerce

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Browsing School of Commerce by Author ": Yohannes Alemneh"

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    Institutions as a Catalyst for Economic Growth in Ethiopia
    (Addis Ababa University, 2025-10-25) : Yohannes Alemneh; r: Birhanu Denu (PhD)
    This study investigates the role of institutional quality as a catalyst for economic growth in Ethiopia over the period 1992–2024. Using the Autoregressive Distributed Lag (ARDL) model, the research analyzes both long-run and short-run relationships between real GDP and selected explanatory variables, including gross fixed capital formation, inflation, government expenditure, and an institutional quality index derived from governance indicators such acontrol of corruption, rule of law, regulatory quality, and government effectiveness.Descriptive analysis reveals substantial variability in all variables, underscoring the institutionalweaknesses that have characterized Ethiopia’s recent history. Unit root tests confirm a mix of stationary and non-stationary variables, justifying the application of the ARDL bounapproach. The long-run results indicate that institutional quality has a statistically significant negative impact on economic growth, suggesting potential transitional costs or ineffduring institutional reform processes. In contrast, grospositively, albeit marginally, to long-term growth. Government expenditure and inflation short-run dynamics, with government expenditure negatively affecting economic output.The error correction term is negative and statistically significant at the 1% level, confirming a stable adjustment mechanism whereby approximately 50.6% of deviations from long-run equilibrium are corrected annually. Overall, the findings highlight the complex and sometimes counterintuitive role institutions play in economic performance and emphasize the need for deliberate, well-sequenced governance reforms that support inclusive and sustainable growth