Browsing by Author "Aklilu, Seyoum"

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    The Effects of Macroeconomic Factors on Private Investment in Ethiopia
    (A.A.U, 2007-03) Aklilu, Seyoum; Paramaiah, Ch.(Dr)
    Private investment plays indispensable role in fostering economic growth, alleviating poverty and in upgrading social capital and services. Understanding the different factors affecting private investment in developing countries ill general and in Ethiopia in particular, has a paramount importance. This study tries to model some of the macroeconomic factors that affect private investment in Ethiopia during the period J 964/65-2004/05 based on the argument that private investment in developing countries is externally constrained apart from being affected by risk and uncertainty variables. The study employs the vector auto regression (VAR) methodology that account for spurious regression and erogeneity bias. This methodology also provides suitable tool for policy analysis by distinguishing the long and short-run impacts of the explanatory variables. The result indicates that over the last four decades (J 964/65-2004/05), economic growth, foreign exchange availability and trade flows stimulate private investment both in the long and short-runs. The positive effect of foreign exchange availability is found to be relatively strong supporting the argument that private investment in developing countries is externally constrained. The study also suggests that public investment on economic and social infrastructure has a crowding-in effect and this effect is observed only in the long-run. Furthermore, domestic inflation rate appears to stimulate private investment in the short-run.