Browsing by Author "Bargicho, Seida"

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    The Effects of Government Expenditure and Tax on Economic Growth in Ethiopia
    (Addis Ababa University, 2016-07) Bargicho, Seida; Hassen, Seid (PhD)
    This study is under taken to analyze the effect of government expenditure and tax on economic growth in Ethiopia. The objective of the study is examining which components of government expenditure and tax compositions stimulate the economy and which of them do not both in the short run and in the long run. In the descriptive part of the analysis the researcher found that the trend of both government expenditure and tax has been growing throughout the year under consideration at real term. The current government disperses the largest part of its total expenditure in the form of capital expenditure as opposed to the Derg regime where the largest part of the expenditure was distributed in the form of recurrent expenditure. From the revenue side both the Derg and EPRDF governments on average collected a larger part of their tax revenue in the form of indirect taxes. However, during the Derg regime out of the total indirect taxes domestic indirect taxes constituted the largest share and followed by import duties and taxes while the reverse is true for the current government. In the econometric analysis Co-integrated Vector Error Correction approach is applied for the identification of which components of government expenditure and tax compositions have significant effect on the Ethiopian economy, based on the Ethiopian data from the sample period of 1980/81 to 2013/14. The estimation results indicate that, in the long run current expenditure and direct taxes have negative and significant effect on the real GDP. However capital expenditure and indirect taxes have positive and significant effect on the real GDP. On the other hand, in the short run, government current expenditure, government capital expenditure and direct taxes do not have any significant meaning in explaining economic growth, whereas indirect taxes have positive and significant effect on the short run real GDP of the Ethiopian economy.