Development Economics

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Major Challenges to the National Extension Intervention Program (Neip) in Addressing the Food Security Problem in the Snnprs
(Addis Ababa University, 2001-05) Abiyo, Abera; Doilicho, Beyene (PhD)
Factors that Contribute to the Failure of Micro and Small Enterprise in Addis Ababa City, Ethiopia
(Addis Ababa University, 2021-01) Jabessa, Bayissa; Denu, Berhanu (PhD)
Micro and small enterprises (MSEs) development are among the focus areas where efforts are being made in Ethiopia to reduce poverty and foster economic growth and development. The main purpose of this study was to investigate factors that threaten the existence of MSEs and leads to the failure of MSEs in Addis Ababa. The study has selected 130 enterprises using stratified probability sampling from the sample frame of operating and closed MSEs, and conducted an interview via phone. A binary logistic regression model; that uses Stata statistical software was employed. Necessary tests such as model specification, model fitness, and multicollinearity tests were conducted and the assumed binary logistic regression confirmed to suit the model. The result was interpreted using the odds ratio and marginal effect. Accordingly, factors such as lack of self-motivation to start own business, lack of own work premises, lack of access to the market development, firm size micro-enterprise, and gender of a business owner being female were found significant and have positive relationship MSEs failure. Whereas factors prior work experience and lack of access to the use of technology have a negative relationship with MSEs failure. Therefore Addis Ababa job creation and enterprise development sector office and other concerned development agencies need to note factors identified for MSEs failure and use them as an input while planning and mentoring MSEs operators to reduce the effect of factors that contribute to MSEs failure and make a better business environment for business owners and sector can effectively contribute to the country’s economic development. So as to reduce the constraints/challenges that lead to the MSE's failure, suggestions based on findings and research directions were forwarded.
Does Use Of Credit Improve Welfare Outcomes Of Households’? The Empirical Case Study In Ethiopia
(Addis Ababa University, 2021-01) Getye, Dereje; Gutu, Zelalem (PhD)
At this time financing is one of the most powerful tools for fighting poverty primarily by providing loan to the poor section of the society. The number of formal and informal financial institutions serving the poor in Ethiopia has grown with in short period of time .The constant growth in the sector has created a competition for scarce financing among institutions. Hence, recent years have seen a growing push to investigate the demand of finance and the access of credit especially for the rural households. In light of this, the study analyzed and investigated the determinants of credit and the impact of credit use on the improvements of welfare outcomes in Ethiopia. Probit model was adopted for the selection model and Linear Regression was used from the selection model to calculate the total and average food consumption and total expenditures of households. Results are based on data from the secondary sources and a sample of 2676 households. Descriptive statistics and Endogenous Switching Regression estimation were used for the outcome equation to estimate the impact of credit on households’ welfare. The analysis revealed that access to extension service, total livestock holding, availability of family labor force, participating in Non-farm Enterprises, and gender of the household head are important determinants for taking credit. The analysis further revealed that access to credit has positively and significantly associated with the improvements of households’ welfare outcomes. Finally, based on both descriptive and econometric results, improving rural farm households’ access to extension service, sizing Non-farm Enterprises and livestock sector, are likely to improve welfare outcomes like food consumption and total per capita annual consumption.
The Nexus Between Foreign Direct Investment, Domestic Investment and Economic Growth in Ethiopia
(Addis Ababa University, 2021-01) Eshete, Abebaw; Debebe, Sisay (PhD)
This study empirically studied the link between FDI (Foreign Direct Investment), domestic investment (private and public investment) and economic growth of Ethiopia for the period 1992 to 2019 by applying time series modelling and tests. ADF test for unit root result indicates all the variables are integrated of order one I (1), at their first differences. Johansen cointegration test shows the presence of cointegration among the variables in the long run. The long run estimates it indicated that domestic investment (private and public) and FDI have a positive relationship with economic growth, while, exchange rate was insignificant and negative relationship with economic growth of Ethiopia. Meanwhile, the Error Correction Term result indicates, the long run economic growth shock is adjusted (back to) equilibrium by 48% within a year. The pairwise Granger causality result showed economic growth Granger causes, FDI and vise-versa and there exist a bi-directional causality between FDI, exchange rate and economic growth. Impulse Response Function (IRF) indicates the response of economic growth to a unit standard deviation/shock/ on FDI, private investment, public investment and exchange rate were positive. Variance decomposition showed, the variability of economic growth fluctuation explained at the first period by itself and 73.7% shock explained in the second period, and 26.3% of shock is explained by FDI, exchange rate, private and public investment as a whole. Finally, as a policy implication the study recommends, government enhancement of private investment and FDI by removing of bottlenecks, such as volatility of exchange rate and creating fertile environment of investment in Ethiopia.
The Impact of Institutional Quality on Income Inequality: Comparative Economic Analysis of Ethiopia and Uganda
(Addis Ababa University, 2021-01) Tafere, Norahun; Lechisa, Gidisa (PhD)
Income inequality is currently a global issue since the gap between the rich and poor people within countries has been rising and it is one of the causes for polarizing societies as well as affects social cohesion among the society in a country. While there are various causes for the observed income inequality globally, there is still an acceptable suggestion that rising income inequality can be controlled by improving the quality of existing institutions. The main purpose of this paper is to explore the impact of institutional quality on income inequality in the case of Ethiopia and Uganda. The study uses time series annual data from 1991 to 2019, and an effort is made to identify the short run and long run impacts of institutional quality on income inequality in Ethiopia applying an Autoregressive Distributed Lag (ARDL) and Error Correction Methods (ECM). The findings of the study revealed that voice and accountability and rule of law are affecting income inequality in the long run for Ethiopia, while rule of law and political stability and absence of violence/terrorism has negative effect for Uganda in the long run. The coefficient of the ECM is found with the appropriate sign and magnitude. In general, the findings of the study highlighted that institutional quality has a vital role for income inequality reduction through the instrument on income redistribution from the richest to the poorest segment in both countries.
Macroeconomic, Sector-Specific and Institutional Determinants of Banking Sector Development in Ethiopia
(Addis Ababa University, 2021-01) Admasu, Mulugeta; Denu, Berhanu (PhD)
This paper aims at investigating the macroeconomic, sector-specific and institutional determinants of banking sector development in Ethiopia using fixed effect model. Using yearly quantitative panel data from 2014 to 2018, the study found real GDP growth rate has insignificant effects on both banks private sector credit to GDP and banking stability. The regression result shows that inflation has a positive significant effect on private sector credit, and negative relationship with the banking soundness. Further, trade openness, reserve requirement and rule of law index have found significant but negative effect on private sector credit, and significant and positive influence on banking soundness. It is therefore recommended that government of Ethiopia ensures maintain low inflationary and high economic growth in order to stimulate financial development. Moreover, national bank of Ethiopia should consider adjusting the cash reserve ratio of banks downwards.
Major Drivers Of Rural -Urban Migration Towards Addis Ababa City (A Case Study Of Government And Private Sector Employees, The Economics Scene)
(Addis Ababa University, 2021-01) Getahun, Degnet; G/Mariam, Mulugeta (PhD)
The study primarily was proposed to investigate the ‘major drivers of rural-urban migration towards Addis Ababa city’ in specific reference to educated employees across the country. The study was conducted on online google survey format and 281 employees were participated in the online survey among which 150 are migrants and 131 are non-migrant employees. Both descriptive statistics and econometrics analysis of binary logistic model was applied to the study through statistical tools of both Stata & SPSS. Based on the descriptive analysis income gap between migrants & non-migrants, gap in access to basic infrastructure, geographic proximity, low income level, overrated attitudes to the city & expectations are the major drivers. According to the binary logistic econometrics results being male, having rural origin, geographic proximity of place of birth, higher expected income, higher expected wealth, higher current income & having families with some plot of land positively influence migration decision significantly and higher education level of both migrants and their families, age, oversea migration plan, inhibits migration towards the city. Hence policies towards infrastructural service redistribution, reducing urban bias ,budget redistribution, encouraging educational accessibility, establishing other competent cities or developing the existing regional cities will have better out comes to the future of the city and the migrant’s life as well as to the country’s economy at large.
The Contribution of Commercial Banks to Economic Growth of Ethiopia
(Addis Ababa University, 2021-01) Geletu, Hailemariam; Denu, Berhanu (PhD)
No country can ever have a healthy economy without a sound and effective banking system. In the system of modern economy, banks play a very sound role in economic development of country. They collect the surplus savings of the large group of population and make them available for those economic agents who have best investment opportunity. They also create new demand deposits in the process of granting loans and purchasing investment securities. They stimulate a country‟s economy through facilitation of economic activities. This research paper has made its focus to the empirical study of the contribution of commercial banks to the economic growth of Ethiopia by taking financial sector development indicator variables deposit, loan, asset and profit as an explanatory variables and RGDP as a dependent variable. The study empirically analyses the contribution of commercial banks to Economic Growth in Ethiopia using time series data over the period 2001-2020.After the data‟s are confirmed for normality, causality, serial correlation and collinearity tests a five variable time series Ordinary Least Squares regression analysis is employed to estimate the parameters. The result of this study, therefore, provides that there is positive and significant relation between the independent variables asset, deposit and loan with RGDP and a negative but significant association between profit and RGDP. And this could have a sound and comprehensive benefit to the study country.
The Nexus between Financial Development, Foreign Direct Investment and Economic Growth in Ethiopia
(Addis Ababa University, 2021-02) Abamo, Temesgen; Gutu, Zelalem (PhD)
Foreign direct investment (FDI) has been recognized as a growth-enhancing factor in various economies more especially in less developed countries. It is among the most vibrant foreign inflows that promote economic growth. Foreign direct investment (FDI) improves economic growth; however, the FDI that contributes to the growth is dependent on the recipient countries circumstances. The aim of this study is to empirically investigate the relationship between financial development, foreign direct investment (FDI) and economic growth, and to examine the effect of the interaction variable on economic growth in Ethiopia. The study used the co-integration and Autoregressive Distributed Lags Approach (ARDL) approach, using time series data which covers from 1981-2019. Also the study employed Granger causality test to see the direction of causality. From the result of the bound test there is a long-run relationship among the variables. The obtained results shows that FDI and private sector credit has a positive and significant impact on economic growth, while, the interaction variable has a significant negative relationship with economic growth in the short run. The result also revealed that in the long run private sector credit and the interaction variable has a positive and significant impact on economic growth. However, the FDI to have a positive effect on economic growth of Ethiopia in the long run if the threshold level of financial development should be attained. Moreover the Granger causality test result shows bidirectional causality from foreign direct investment (FDI) to GDP per Capita, private sector credit to GDP per capita and a unidirectional causality from FDI to private sector credit. The result suggest that there is a need to reform the domestic financial sectors to make it more attractive for any foreign firms to invest in, although, this can be considered as a pre-condition for the positive impact of FDI on growth. Thus, the reform of the domestic financial sector should precede policies that would attract FDI inflow into the Country.
Demographic Dynamics and Economic Development in Ethiopia By:
(Addis Ababa University, 2021-02) Bassie, Ermias; G/Mariam, Mulugeta (PhD)
The study is based on a time series data covering a time period of 1990 to 2019 and analyzed the relationship between population (with other demographic variables) and economic development (Real GDP per capita is used as a proxy). Considering econometric analysis, the study employed different tests such as unit root, co-integration, and Granger causality tests and vector error correction model. According to the estimation result, population Granger causes real GDP per capita i.e. only unidirectional causality which runs from population growth to economic development. Here working age population and young population granger causes real GDP per capita but not vice versa. But real GDP per capita didn’t cause them. On the other hand, real GDP per capita causes life expectancy at birth and aged population but not vice versa. In the long run population growth, working age population (WAPO) has positive and significant effect on economic development while young population group (CHPO), aged group (AGPO) has a negative and significant effect on economic development. As the finding above shows Ethiopia is under stage two of demographic transition which is characterized by lower death rate but higher birth rate. This shows the need to revise population policy and decrease fertility rate by using different family planning technics and contraceptive methods. So in line with decreasing fertility rate creating human capital development is a key for countries economic development. so greater attention must be given to this since Ethiopia has a promising segment of young population once very trained, educated and experienced its economy will expand. In addition to this improving the social and economic status of women is a key for a decrease in fertility rate. The development of old-age and other social security systems outside the extended family network can also be a solution to lessen the economic dependence of parents, especially women, on their offspring since the study indicated that aged population affects economic development significantly and negatively.
The Link between Human Capital, Unemployment and Economic Growth in Ethiopia
(Addis Ababa University, 2021-02) Mitiku, Tsegaab; Gebremedhin, Mulugeta (PhD)
This study investigates the link between human capital, unemployment and economic growth in Ethiopia over the period 1980/81-2018/19. The ARDL Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short run impact of human capital and unemployment on Economic growth. Both in the long run and short run, human capital index in the form of years of schooling and returns to education has a positive impact on the level of output whereas Unemployment rate shows a negative relationship. The value of coefficient of error correction term (-0.7061) shows about 70.661percent annual adjustment towards long run equilibrium. Unlike its long run significant impact, labor force participation rate has no significant short run impact on the economy. The above results have an important policy implication. The findings of this paper imply that economic performance can be improved when human capital index based on years of schooling and returns to education show an overall increment. Such enhancements to a great extent affect human efficiency which prompts improved public yield. Henceforth strategies should be intended to make institutional limits that expansion school enrolment and returns to education by reinforcing the foundation of instructive organizations that produce quality labor.
Determinants Of Women’s Labor Force Participation: The Case Of Ethiopia
(Addis Ababa University, 2021-02) Abebe, Dereje; Gebremedhin, Aregawi (PhD)
Women constitute almost half of the Ethiopian population and without hesitation they play an important role in economic growth and development. However, women‘s labor force participation is low when compared to their counterpart males in Ethiopia. As a result of this women‘s economic status is lower compared to male and this implies lower output and lower economic performance in Ethiopia. In Ethiopia there is a labor force participation gap and it needs to be investigated seriously. Many studies had been done with this regard but there are limitations in scope and coverage and in addition to this there are contradicting findings concerning the factors/challenges that affect women‘s labor force participation. Thus, the purpose of this research is to find out factors/challenges that determine women‘s labor market in Ethiopia. In order to identify factors/ challenges that determine women‘s labor force participation in Ethiopia the Ethiopian Demographic Health survey (EDHS) was employed. The 2011 and 2016 cross sectional data set were employed and these two data sets were pooled so as to increase sample size and observation. This pooled data set is assumed to help identify factors/challenges that determine women‘s labor force participation in Ethiopia. For the analysis of this research paper descriptive and econometric analysis were employed. Specifically logit/logistic regression model was employed to analysis the econometrics part. The results of the descriptive statistics indicate that 71.7 percent of women are not participating in labor market and only 28.3 percent of women participate in the labor market. The results of the logit/logistic model revealed that education level of women, economic status, number of household members, husband‘s education, women‘s age, and sex of household head affects women‘s labor force participation positively and significantly while number of children age five year and under, pregnancy and place of residence rural negatively and significantly affects women‘s labor force participation. The results obtained from this study have their own implications on women‘s labor force participation in Ethiopia. As a result the findings of this research could invite further investigation on factors/challenges that determine women‘s labor force participation and might help policymakers to reconsider the issue of women‘s labor force participation and its role to economic growth and development in Ethiopia
The Impact of Human Capital Development on Economic Growth in Ethiopia
(Addis Ababa University, 2021-02) Lakew, Asegidew; G/Mariam, Mulugeta (PhD)
Human capital is one of the required conditions to attain sustained economic growth. This study investigates the impact of human capital development on economic growth in the Ethiopian case, throughout the period from 1981 to 2019. Meantime, by subdividing human capital development into education and health human capital the study examines the impact on economic performance. Moreover, the study uses the autoregressive distributed lag (ARDL) technique of co integration and Error Correction Model (ECM) are applied to look at the short and long term impact of human capital development. The result shows that except for short run health human capital has a significant positive impact on economic performance. However, education human capital has an insignificant and significant negative impact on economic growth in the short and long run respectively. The error correction term is a negative sign and statistically significant at the level of 1%, Showing that the deviation of the previous year fairly adjusted. We will conclude that in the workplace there is incompatibility with essential skills and additionally the education quality is poor. Besides, an improved life expectancy rate may boost economic growth within the long standing time. Therefore, policymakers and the government ought to reform education establishment capability and commit plenty of funds to the health sector to strengthen human capital development.
Determinants of Growth Potential and Constraints of Micro and Small Enterprises in Lideta Sub City of Addis Ababa City Administration, Ethiopia
(Addis Ababa University, 2021-02) Soboka, Diro; Denu, Berhanu (PhD)
The general objective of this study was to assess the growth potential and identify the constraints of MSEs operating in Lideta Sub City of Addis Ababa City Administration. The study was adopted descriptive and explanatory research design with qualitative and quantitative approaches of cross sectional data collected from primary and secondary sources through a structured questionnaire, observations and interviews. The sample size was determined by using slovin’s formula and contained 162 samples of MSEs that are grouped into sectors of manufacturing, construction, service, trade and urban agriculture. These samples were selected from each sector using proportional stratified random sampling method. The data were analyzed with linear regression analysis of Ordinary Least Square technique and summary statistics. The findings revealed that current capital, gender and education are found to be significant factors that affect MSE growth positively and statistically significant. The findings also showed that initial capital and experience are statistically significant and negatively associated with the growth of enterprises by employment. However, source of finance, family size and age are found to be statistically insignificant variables in this study. Policy makers and other stakeholders should reconsider financing strategy for MSEs and firms of MSEs with lower capital should take actions towards better improvement of their growth potential. The government actors and other stakeholders should give due attention to gender difference appearing in the participation of MSE operation. The potential limitations of this study were time and financial constraints. Finally, future panel surveys and availability of other data may call for further studies in order to have inclusive solution for the constraints of MSE growth.
Assessment Of Public Expenditure And Its Impact On Agricultural Growth In Ethiopia
(Addis Ababa University, 2021-02) Wondmagegne, Eden; Debebe, Sisay (PhD)
This research deals with identifying those public expenditure factors affecting agricultural growth in Ethiopia. The study is based on a time series data of 38 years from 1980/81 to 2018/19. During this period, the country’s economy has experienced both upswing and downswing in its agricultural sector. Government expenditure in different sectors including agriculture and its allied activities, education, health and roads construction is expected to promote agricultural growth. Here ARDL approach to co integration and an error correction representation of the ARDL model have been used due to certain advantages. The result of the Bounds test indicates the presence of a long-run co integrating relationship between the variables in the study. The results reveal that in the long-run, the effect of public expenditure through recurrent expenditure, on agricultural growth is significantly negative, while expenditure on education and health to enhance agricultural growth are significantly positive on the short-run that is in line with several earlier studies. Public expenditure in capital and roads construction to enhance agricultural growth is significantly negative in the short-run however public expenditure on capital, education, health, and roads construction to enhance agricultural growth do not significantly affect agricultural growth in the long-run. The discoveries reveal that prudent utilization of government expenditure cans possibly accelerate agricultural development and improve its efficiency.
Analysis of Risk Factor Correlated With Child Malnutrition in Ethiopia and Modeling the Progression of Malnutrition with Child Age
(Addis Ababa University, 2021-02) Tefera, Mesay; Gebremedhin, Aregawi (PhD)
Although the problem of malnutrition affects the entire population, children are more vulnerable because it hinders their optimal physical growth, cognitive and socio-emotional development. undernutrition is associated with 45 percent of deaths of under 5 children. The solution for this serious public health issue is essential. From this perspective, this study aimed to identify the risk factor correlated with malnutrition and to examine the progression of malnutrition as child grows from his/her 1st to 15th birthday. The data for the study were taken from the Young Lives panel data for Ethiopia. To achieve objectives of the study, two malnutrition indicators (stunting and thinness) were studied. These indicators were examined independently due to their biological differences. Statistical models that handle the complexities of the panel data and transitional probability were employed. Marginal GEE Model, Generalized Mixed Effect Ordered Logistic Model and Markov Transitional Model used for analysis. The findings of the study revealed that sex of child, child age in month; mother education level, wealth index and number of drought animal own by household were found significant determinant factors of stunting. On the other hand, sex of child, child age in month, region, wealth index, number of drought animal own by household and number of small ruminate animal own by household were found significant determinant factor for thinness. Markova Transitional model analysis indicated that female children had the higher probability of recovering from both stunting and thinness than their male counterpart. To reduce child malnutrition, some curtail steps regards educating mothers and improving economic situation of population should be considered.
The Impact of Budget Deficit and Aid on Economic Growth in Ethiopia
(Addis Ababa University, 2021-02) Gebre, Eshetu; Debebe, Sisay (PhD)
The study provides empirical results to investigate the relationship between budget deficit, aid and economic in Ethiopia. Specifically the existence of the relationship between budget deficit, aid and economic growth in the country was tested with secondary time series data starting from 1990/91 to 2018/2019. Data from National bank of Ethiopia, ministry of finance and economic development and world development indicators collected through organizations' database and through letter requesting the same was used to conduct the study. VAR (vector Auto regressive approach) and vector error correction model (VECM) approach was used to investigate the relationship between budget deficit and economic growth while Harrod-Domer to investigate the relationship between aid and growth. The major findings of the study were positive relationship between budget deficit and economic growth both in the short run and long runs which supports Keynesians theory. However, aid has positive relationship with economic growth in the short run and negative impact in the long run. According to the VECM result a percentage change in aid results in 0.18% decrement of economic growth and a percentage change in budget deficit results in 0.16% increment of economic growth other variables being constant. The study suggests the increase of revenue by broadening tax base through establishing pragmatic system and expend on prioritized productive sectors like health, education, infrastructure sectors such as power, telecom, roads etc., so that it will enhance the return of both human capital and physical capital, which will go a long way in increasing the national income. Keywords: Budget Deficit, Aid, Economic Growth, GDP, Ethiopia, VAR, VECM
The Impact of Tax Revenue on Economic Growth in Ethiopia
(Addis Ababa University, 2021-03) Kader, Mohammed; Gutu, Zelalem (PhD)
The main objectives of the study is to examine the long run and short run impact of tax revenue on economic growth in Ethiopia using GDP per capita, as a proxy for economic growth over the period 1990/91to 2019/20. The trends of tax revenue and GDP per capita growth rate of Ethiopia is fluctuating during specified time of period. ARDL and ECM methods are used for the study. The results of the Bound test suggests that there is long term correlation with GDP per capita, tax revenue, trade deficit, and real effective exchange rate. The result of ARDL models indicates that estimated coefficients, tax revenue, is significant effect on economic growth and their signs are consistent to the existing theories. The finding of this study concerning long run positive impact of tax revenue on economic growth is consistent with the endogenous growth models. In short-run, the estimated short-run model indicates that tax revenue is significantly positive impact on GDP per capita at 5% significance level. The findings of the research have an important policy implication. The result of trends of tax revenue and GDP per capita growth rate of Ethiopia during the study periods are fluctuating so it recommended that Ethiopian government should take appropriate measures that makes tax revenue and GDP per capita growth rate lower fluctuating trends. In order to increase economic growth, it is important to strengthen the taxation system. Firstly, Tax authority should build strong and stable tax institution and encourage volunteer taxpayers. Secondly, Policy makers should build a secure business atmosphere for taxpayers to raise tax revenue. Finally, government revenue and government expenditure must goes in parallel ways, so government establish strategies that encourage distortionary taxation and productive government expenditure. There are several further research direction Firstly, the study did not consider some variables, like illegal trade, contraband trade, tax evasion and informal sectors activities. Secondly, macroeconomic variables such international trade, inflation rate, and remittance that directly affect economic growth but cannot included in the model so this can be an opportunity or further research directions.
The Role of Foreign Aid for Economic Development of Ethiopia
(Addis Ababa University, 2021-06) Hiruy, Yoseph; Denu, Berhanu (PhD)
The research has tried to investigate imperially, the contribution of official development assistance in filling the resource gaps of Ethiopia. For this purpose, quantitative data has been gathered, organized and analyzed from the year 1990 to 2019 G.C. Co-integration test and Error Correction Model was applied in order to investigate the long run and short-run relationship between dependent and the independent variables. Accordingly, the research investigate the reality of Ethiopia having: the saving investment gap for the year 2005 – 2020 at average was 14.56 % percentage of GDP, the trade gap for the year 2005 – 2020 in average was 17.06 % percentage of GDP and average fiscal gap (budget deficit) from year 1993 to 2018 including the grant received was 12.10 Billion Birr. The empirical results from econometrics model reveal that foreign aid has positive impact on economic growth in both long run and short run and statistically significant at 1 percent significant level. The positive and significant error correction term shows that the extent to which ODA deviate from the long run steady state path after a certain shock, which, is 0.329 percent each year. The important policy implication of the study proposes that more effort has to be made to improve the negative impact of interest payment on external debt, mainly because of existence of poor institutional arrangement, which accumulate unpaid sums that shall create burden to the future repayment schedule and doubt on potential donors. the fund to unproductive sectors. The government has to ensure, a close monitoring and consistent management strategies, which is used to avoid mismanagement problems specially, for timely repayment strategy. Finally, the research paper tried to realize that the absorption capacity using assessment on rate of increase in saving and investment through the last thirty years, and the mere existence of the resource gap in every years and time-to-time increase of the management capacity of institutions.
Effects of Trade Openness on Economic Growth in Africa
(Addis Ababa University, 2021-06) Demissie, Samuel; Gutu, Zelalem (PhD)
Countries around the world are liberalizing their trade policies because trade openness is considered as one of the primary tools to increase economic growth. The paper empirically analyzes the effect of trade openness on the economic growth in Africa countries over the period 1996 to 2019. The empirical result shows that negative association between trade openness and economic growth in African countries, however; finding of the study approved a significant positive relationship between trade liberalization and economic growth of Africa countries is contingent on Initial Income per capita and other explanatory variables. Moreover, the study result also established that the impact of trade openness is more significant and beneficial to countries with higher level of initial per capita income, as well as, countries with higher Human capita and FDI. The paper recommends that efforts are required to ensure stable macroeconomic environment which will encourage other stakeholders to play their part in the growth process. Africa Countries should invest both in physical and human capital for the growing labour force. This could be done using domestic sources as well as encouraging foreign direct investment.

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