Browsing by Author "Solomon Negeri"

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    The effect of inflation on the financial sector development in Ethiopia
    (A.A.U, 2025-04-23) Solomon Negeri; Alem Hagos (PhD)
    This research investigates the effects of inflation on the progression of Ethiopia's financial sector, particularly the banking sector, from 2000 to 2023. The primary aim was to understand the relationship between inflation and the growth of the financial sector, while the specific aims involved: analyzing the direct effects of inflation, considering the moderating influence of economic growth, determining how fluctuations in interest rates affect the inflation-finance connection, and offering pertinent policy suggestions. A quantitative research methodology was adopted, supported by an explanatory research design to identify causal relationships between macroeconomic variables. The study relied on secondary time series data sourced from the World Bank, International Monetary Fund (IMF), and National Bank of Ethiopia (NBE). Data analysis was conducted using STATA statistical software 2.0 version, applying linear regression models. The Return on Assets (ROA) was used as a proxy for financial sector development, with inflation as the main independent variable and real GDP and interest rate as control variables. The regression findings reveal that inflation negatively affects the profitability of Ethiopia’s banking sector, with a coefficient of. Though only marginally statistically significant, the result is economically meaningful and consistent with international literature. In contrast, real GDP was found to have a statistically insignificant and weak negative effect on ROA, suggesting that overall economic growth does not directly boost bank profitability in the Ethiopian context. Likewise, interest rate volatility exhibited an extremely large but statistically insignificant negative coefficient, indicating possible data scaling issues or limited impact due to interest rate regulations. Overall, the study concludes that controlling inflation is critical for maintaining financial sector stability and profitability. Finally the study recommended that to maintain the financial sector development the focus must be