International Economics

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Determinants of Foreign Direct investment in Ethiopia: An Autoregressive Distributed Lag Approach
(A.A.U., 2019-11) Amanuel, Tesfaye; Lakew, Alemu (PhD)
This paper attempts to study the determinant of FDI in Ethiopia for the time period from 1980-2015. To this end, the study has reviewed theoretical explanations relating to the determinants of foreign direct investment and the study has also reviewed relevant empirical literatures focusing on the determinants of FDI in the context of developing countries. Using Data on foreign direct investment and number of telephone users that is obtained from United Nations Conference on Trade and Development (UNCTAD). Real effective exchange rate, inflation rate, export and import data were obtained from National Bank of Ethiopia (NBE), and Ethiopia Real GDP from Ministry of Finance and Economic Development (MoFED). By adopting model that was used by Erdal Demirhan etal (2008) this paper examine prominent determinants of FDI and finds that economic growth, macroeconomic stability, openness to trade are important determinants of foreign direct investment. The results suggest policy makers should give due attention to promoting liberalization and implementing sound economic policies that can ensure macroeconomic stability in the country.