Browsing by Author "Beksisa, Desalegn"

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    The Relationship between Budget Deficit and Economic Growth: Evidence from Ethiopia
    (A.A.U, 2021-06) Beksisa, Desalegn; Legesse, Guta (Dr.)
    This study examined the relationship between budget deficit and economic growth of Ethiopia using time series data for the period 1991 to 2019 by ap- plying the ARDL bounds testing approach. The empirical results indicate that budget deficit and economic growth in Ethiopia have a negative relationship in the long run, and have a weak positive association in the short run. A one percent increment in the budget deficit causes 1.43 percent decreases in the eco- nomic growth of the country. This result is consistent with the neoclassical view which says budget deficit is bad for economic growth during stimulating periods. Moreover, in the long run, both variables trade openness and inflation have a positive impact on Ethiopian economic growth, and on the other hand, the eco- nomic growth of Ethiopia is negatively affected by the nominal exchange rate in the long run. Apart from this, in the long run, gross capital formation and lending interest rates have no significant impact on the economic growth of the country. Therefore, the study recommends the government should manage its expenditure and mobilize the resources to generate more revenue in order to contain the impact of budget deficit on economic growth.