Development Economics
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Item Analysis of Technical Efficiency of teff Production among Smalleholder FarmerS: In Wolayta Zone, Southern Ethiopia Regional State(Addis Ababa University, 2024-06) Daniel Lencha; Sisay Debebe (PhD)In Ethiopia increasing agricultural production of staple crops is necessary for economic growth,the alleviation of poverty as well as improvement of the security of food and nutrition. In the wolayta zone, teff is one of the staples crops which regions with utilization of resource andimprovement of efficiency of production is as to obtain greater output in the production system. The aim of this study was to analyze the level of the technical efficiency of teff production amongsmallholder farmers and its determinants in Wolayta zone. A multi-stage sampling technique wasemployed to select 286 sample farmers. Quantitative data were collected through individual survey based structured questionnaires. The questionnaires were designed and formulated tocollect information about socio-economic and demographic determinants of technical efficiency of teff production from sampled farm house holds to obtain data pertaining to teff productionduring 2023/2024 production year. A Cobb-Douglas trans log production model was used to estimate technical efficiency and probit model was used to identify the determinants of technicalinefficiency of teff production. The parameter estimation technical efficiency showed that teff output was positively and significantly influenced by 27%, by Urea 7%, NPS 8%, pesticide 16%oxen days 8%, labour days 8% improved seed 8% and local seed affect negatively by 11%. The technical efficiency teff production is positively and negatively affected by education 4.8%,training 3.4%, experience 0.2%, age 0.2%, family size -0.7, extension contact -0.2% and nonfarm income -5.5% affected technical inefficiency of teff production in the study area. Thiswould mean that there is a room to increase technical efficiency of teff production. From this result I recommended to increase the farmers technical efficiency in teff production such as ureaNPS and pesticides. Because of education variable affect technical inefficiency negatively the zonal administrator needs to improve education status of the farmers.Key words: Approach, Technical efficiency, stochastic frontier approach, wolayta zone,Ethiopia.Item The Effect of Education on Economic Growth in Ethiopia(Addis Ababa University, 2024-06) Dawit Belemo; Berhanu Dana (PhD)Ethiopia, a nation with great potential, faces an important challenge: a large portion of the workforce lacks necessary skills. This study aims to analyze the impact of education on economic growth in Ethiopia, focusing on how enrollment in pre-primary, primary, secondary, and tertiary education, along with government spending on education, influence Gross Domestic Product (GDP). Using quantitative data analysis on Ethiopia's data sets from 2000-2023, this study seeks to uncover the individual and combined effects of education variables as independent variables and GDP as the dependent variable. The study employs a time series model analysis utilizing secondary data from reputable sources like the Ministry of Education of Ethiopia and the World Bank to examine the relationship between education and economic growth in Ethiopia, while accounting for other factors that may impact economic growth. The result of this study analysis shows pre-primary and primary enrollment was found to have a negative connection to GDP. This suggests that just increasing the numbers at these levels doesn't directly lead to economic growth, possibly due to issues with education quality, infrastructure, or other social and economic factors. In contrast, secondary enrollment, tertiary enrollment, and government education spending exhibited a positive relationship with GDP. This study highlights the importance of education and its potential to drive economic development in Ethiopia. By investigating the link between education and economic growth, this study aims to contribute to a better understanding of the factors influencing productivity in the country. Through a detailed analysis of empirical data, the study will seek to provide insights into the role of education in fostering economic growth and propose recommendations for policy interventions. Key words: Skills, Government Spending, Productivity, Development etc.Item Determinants of Urban Poverty Among Households of Sebeta Town, Sheger City Administration, Oromia Region, Ethiopia(Addis Ababa University, 2024-06) Garuma Fite; Birhanu Denu (PhD)Ethiopia is known as a global where all people live in chronic condition of poverty. Especially, attention has not been given for urban poverty on findings and development studies of Ethiopia. The study was conducted with general objective determinants of urban poverty among households of Sebeta town. To gather data both primary and secondary data were used. The primary data source was collected from 361 household heads by distributing pre-prepared structured questionnaire while secondary data was collected from published and non-published materials. To determine general poverty line of the study town, a Cost of Basic Needs (CBN) approach of poverty measurement was employed and household heads in the town were identified as the poor and non-poor. Based on general poverty line in the town measurement of poverty indices head count poverty, poverty gap and severity of poverty were measured. The data was analyzed and estimated by employing descriptive statistics and Logistic regression model depend on the primary data with the probability of households being poor as a dependent variable, and demographic and socioeconomic characters as the explanatory variables. Econometric results of the binary logit regression model revealed that; sex, age, family size, health condition, education level, employment status, income, remittance, saving habit, social capital, asset ownership, access to credit, house tenure and migration were found statistically significant 1%, 5% and 10% significant level. The variables that were negatively correlated with the probability of being poor were sex, age, education, remittance, saving habit, social capital, access to credit, asset ownership, and house tenure. The variables those positively correlated with the probability of being poor were family size, employment status (unemployed), health condition and migration. Hence, the recommendations suggested in this study were cost of food and non-food items should be stabilized, promoting higher education, diversifying income of households, attention should be given to reduce family size, unnecessary rural to urban migration should be controlled, efforts should be done to enhance labor absorb market through job creation by the expansion of micro and small scale enterprises, advancing infrastructures like houses, water, electricity and health service. Keywords: Urban Poverty, Household, Cost of Basic Needs, Logit model and Sebeta, EthiopiaItem The Impact of Government Spending on Economic Growth in Ethiopia(Addis Ababa University, 2024-06) Gizachew Asefa; Sisay Debebe (PhD)This study aims to analyze the impact of government spending on economic growth inEthiopia by using annual time series data from 1994-2023. The study uses public expenditure variables from recurrent and capital expenditure components Such as expenditure oneducation, defense, agriculture, Health, Industry, Transport, Road, Urban Development and Interest payment expenditure components, that expenditure of all selected components are onincreasing trend. The result of the ADF test has shown that all variables are stationary at I (1). Johansen Co-integration validates co-integration among variables as a sign of long runrelationship. VECM used to test to know long run and the short run impact of government spending on RGDP growth in Ethiopia analyzed using STATA. In long run expenditure ofgovernment on Industry development, Urban Development and interest payment is positive and has statistically significant, whereas expenditure on health, education, transport andcommunication and road construction sector has insignificant impact on RGDP growth in Ethiopia. But government expenditure on defense and agriculture sector is negative andsignificant effects in long run. In short run, expenditure on agriculture, education, industry development, transport and communication, urban development, health and expenditure oninterest payment are the major beneficiary for RGDP growth. But only expenditure government on defense and Road construction sector has no significant impact on RGDPgrowth in Ethiopia. The author recommends that there is a need to manage and control Public expenditure, increasing budget utilization system and decreasing corruption.Disaggregated analysis is valuable from the policy perspective therefore author recommended future research is suggested why most of the public expenditure haveinsignificant relation with economic growth in Ethiopia. Finally author recommend that to know the determinants of RGDP growth of developing counties like Ethiopia not only publicspending and also various shocks (i.e. rainfall, political and institutional factors, and etc) should have to be studied. Keywords: Government spending, RGDP, Economic growth, VECM, Ethiopia.Item Determinants of Commercialaization of “Enset” Products: Geta Woreda, Gurage Zone, Centeral Ethiopia(Addis Ababa University, 2024-10) Habtamu Abebe; Birhanu Denu (PhD)The study was aimed to investigating the commercialization level and factor affecting the commercialization of Kocho producers. The study was essentially use primary data that was collected from 186 randomly selected farmers through structured and semi-structured questionnaire. Both descriptive statistics and econometric model was used. Tobit model were used to identify the determinants of commercialization. The result of Tobit regression model shown that educational level of household head, livestock owned, equine owned, distance from the nearest market, transport cost, access to credit, cooperative membership and non/off farm income significantly affected commercialization level of Kocho producers. The study recommends provision of zone and regional agricultural office to advertise in international and local market Ensets are drought tolerance plant and kocho is organic food. It is essential to improve commercialization. Key words: Commercialization, Kocho, Tobit, Gurage zone, Geta districItem Factors Affecting Students’ Academic Achievements in Public Primary Schools: The Case of Yeka Sub-City, Addis Ababa, Ethiopia(Addis Ababa University, 2024-10) Lemmi Hundesa; Berhanu Denu (PhD)This study was undertaken to estimate factors affecting students’ academic achievements in public primary schools in Yeka sub-city using data from a cross-sectional survey of 397 randomly selected respondents (students, teachers, principals and parents). The survey was conducted using a direct face-to-face interview as well as questionnaires to get necessary information from the respondents. This study was motivated based on the results of National Learning Assessment that has been conducted in Ethiopia since 2000 every four years in primary schools, and measures the students’ academic achievements showed that the students’ academic achievements were below the minimum expected score of 50 percent target(EAES, 2023) and it invites researchers for further investigation why it was so. The ordered logit model was used to investigate factors affecting students’ academic achievements. The results of the model revealed that each significant variable among the total of 11 explanatory variables was interpreted based on its corresponding coefficient. These significant variables are: study hour at 5%, school distance at 1%, number of students in the given class at 5% and doing homework at 1% significance levels, respectively. Thus, study hour that students spend studying per day helps students’ achieve higher semester’s average score, as far as school distance increases the semester’s average of students decreases, the higher the number of students in the given class the result of students lowers and the burden of homework on the same day also hinders the students not to score higher results. And also this study puts its recommendations for the stakeholders like supervisors, principals and ministry of education to solve or even try to minimize the problem of large class sizes (large number of students in the given class) to make learning environment conducive. And also as far as doing homework is mandatory to students since it helps them practice activities, it will also be burden if all subjects will be given on the same day to students. so, it is recommended that teachers have to prepare home work schedule and give it for students. Similarly, the researcher forwards recommendations for the unexplained variables that require diagnosis in further investigation to fit the model summary. Key words: Academic Achievements, Factors, StudentsItem The role of Rural Microfinancing in Poverty Reduction: The Case of Berek Woreda, Oromia, Ethiopia(Addis Ababa University, 2024-10) Seboka Shiferaw; Mulgeta G/Mariam (PhD)This study examines the role of rural microfinancing in poverty reduction in Berek Woreda, Oromia, Ethiopia. Despite its proximity to the capital city, Berek Woreda faces significant infrastructural challenges that hinder economic development and sustain poverty, with approximately 45% of the population living below the national poverty line. This research employs a mixed-methods approach, combining quantitative data from structured questionnaires with qualitative insights from interviews and focus group discussions. The sample includes 387 households benefiting from selected microfinance institutions, along with selected stakeholders, local government representatives, and workers/managers of the selected MFIs. Data analysis involves both descriptive and inferential statistics, utilizing tools such as multi-linear regression analysis to evaluate the role of microfinance in improving household income and financial well-being. The findings reveal that microfinance initiatives significantly improve household income levels. However, several barriers, including geographical isolation, high-interest rates, socio-cultural factors, regulatory environment and operational challenges, limit the effectiveness of these interventions. The study concludes with recommendations for addressing these barriers and enhancing the role of microfinance in poverty alleviation. Keywords: Rural Microfinancing, Poverty Reduction, Household Income, Berek WoredaItem A Comparative Analysis of Poverty and Income Inequality Between Bole and Kirkos Sub-Cities in Addis Ababa, Ethiopia(Addis Ababa University, 2024-10) Wondosen Tsegaw; Sisay Debebe (PhD)Poverty and income inequality are significant global challenges with wide-ranging implications. These challenges are particularly prevalent in urban areas of Ethiopia. While Ethiopia has made progress in reducing national poverty rates, urban poverty and inequality remain persistent issues in the country, especially in Addis Ababa. These urban challenges are exacerbated by factors like rapid urbanization, limited job opportunities, and the recent conflict. So, making a comparative analysis of poverty and income inequality between sub-cities helps to identify the nature and extent of these issues. This study therefore investigates the comparative analysis of poverty and income inequality between Bole and Kirkos sub-cities. The study’s objectives include measure and compare the poverty status and income inequality levels in these two sub-cities, as well as identify the key factors driving these economic disparities and poverty. The study employed a structured questionnaire to gather primary data. A multistage random sampling strategy was used to select the research sites, with the Bole and Kirkos sub-cities of Addis Ababa being chosen. Within these two sub-cities, 280 household heads were randomly sampled to participate in the survey. This study used both descriptive and econometric analyses. The descriptive analysis revealed stark contrasts in multidimensional poverty and income inequality between the Bole and Kirkos sub-cities. Kirkos exhibited significantly higher poverty, with 66.5% of individuals classified as poor compared to 32.8% in Bole. The poverty incidence (H) was 0.66 in Kirkos versus 0.32 in Bole, and the Multidimensional Poverty Index (MPI) was more than double in Kirkos at 0.39 versus 0.15 in Bole. Income inequality was also more pronounced in Kirkos, with a Gini coefficient of 0.371 compared to 0.345 in Bole. The ordered logistic regression model identifies several key determinants of multidimensional poverty. The education level of the household head is a significant factor, where a 1-year increase in education reduces the probability of higher multidimensional poverty by 65%. Other variables, such as marial status, dependency, saving, and equb edir membership also significantly affect poverty. The quantile regression analysis also identifies key drivers of household income inequality, including education, occupation, family size, and savings behavior. Higher education and private sector jobs are linked to greater incomes, especially at lower and middle quantiles. Larger families and dependency are significantly negatively related to income levels, particularly at the upper end of the distribution. Based on the results, it is recommended the government should target interventions to alleviate the significantly higher multidimensional poverty in Kirkos sub-city. Expanding access to inclusive financial services, like savings and credit, could help build household resilience, as lack of savings is linked to higher poverty. Addressing key drivers of income inequality, such as home ownership, through affordable housing and financing programs, could also reduce inequality. Keywords: multidimensional poverty, income inequality, ordered logistic regression model, quantile regression model, Bole sub city, Kirkos sub citiy, Addis Ababa.Item The Effect of Financial Sector Development on Economic Growth in Ethiopia: A Time Series Analysis(Addis Ababa University, 2024-10) Yimer Nigatu; Sisay Debebe (PhD)This study investigates the impact of financial sector development on economic growth in Ethiopia from 1994 to 2023. Utilizing descriptive statistics and econometric modeling, the research examines key variables such as GDP growth rate, domestic credit to the private sector, money supply, government expenditure, bank deposits, private investment, and inflation rate. The findings reveal considerable variability in these indicators, with GDP growth averaging 6.85%. Trend analysis indicates a general upward trajectory in economic growth, despite challenges like civil conflict and the COVID-19 pandemic. The econometric model results, including unit root tests and the ARDL long-run estimation, underscore the importance of financial factors in shaping economic outcomes. Notably, an increase in money supply positively influences GDP, whereas increases in domestic credit to the private sector and private investment have a negative long-term impact on economic growth. High inflation rates also negatively affect GDP. The study concludes that while financial development is crucial for economic growth, efficient credit allocation, controlled money supply expansion, effective inflation control, and strategic private investment are essential for sustainable economic development. Recommendations for policymakers include enhancing financial infrastructure, improving regulatory frameworks, expanding money supply judiciously, and fostering strategic private investments. Key words: Financial Sector Development, Economic Growth.Item Determinants of Urban Food Insecurity in Burayu Town of Sheger City Admnistration in Oromia Region of Ethiopia(Addis Ababa University, 2024-07) Bikila Merga; Birhanu Denu (PhD)Food insecurity is a global problem that affects individual, family and nations as a whole. Urban food insecurity is one of the problems that need attention, due to the limitation of most of the studies to the analysis of the risk of food insecurity only as a problem of rural areas. The study analyses the determinants of urban household food insecurity, in Burayu town of Sheger City Administration of Oromia Region in Ethiopia. For this study, a cross sectional data type design and two stage sampling procedure were used to collect 386 sample households randomly in Burayu town; Descriptive statistics and Binary Logistic models were used to describe and analyze the determinants of food insecurity in the study area. The HFIAS results of the study suggested that, most of the households are food insecure, which is about 79% the households in the area were in the risk of food insecurity and 21% of the households were food secure. Based on the HFIAP result, the extent of food insecurity was categorized into; about 26% of the households mildly, 41% moderately, and 12% were severely food insecure. The output of the binary logistic model show that, age, house ownership, income, asset and remittance, educational level of the household heads were negatively and significantly correlated with food insecurity status of household and only dependency ratio and food expenditure were positively associated with food insecurity. Finally, food insecure households were practiced dietary change coping strategies as well as short term i.e. relying on asset and support coping mechanisms to cop up the food shortage. In general, to minimize the risk of food insecurity in the study town, the government and development actors should encourage the food insecure households through short term training on business ideas, give food or financial support for severely food insecure and expand different job opportunities in the town for urban poor. Key words: Household, Food insecurity, Binary Logistic, Urban, Burayu, EthiopiaItem Analysis of Vulnerability to Food Insecurity in Rural Households’ of Ethiopia(Addis Ababa University, 2022-06) Tsige Zeray; Sisay Debebe (PhD)This study examines Analysis of vulnerability to food insecurity in rural households of Ethiopia, using a sample data of 3115 rural households from the Ethiopian socio economic Survey (ESS). Calorie method was employed to determine food insecurity and vulnerability. In addition to descriptive statistics, GLS and the Logit models was used to analyze the data. The Results indicates that, Majority of the households were found to be food insecure, which is 62.95% were found to be food insecure (1961 out of 3115) whereas the rest 37.05% of the households were found to be food secure. Furthermore, the estimated logit model result revealed that Rainfall shock, Death of livestock were positively and significant influence current food insecurity status of household, on the other hand, age of household head, Education level of the household head, annual household farm income, participation in off farm activity, access to credit and remittance were negatively affected the extent of households’ food insecurity. General Least Squares regression results indicate that Total land holding in ha of household head has a significantly positive correlation with calorie intake and Households access to credit significantly increase expectation of food consumption. Empirical finding also shows that rain fall shocks (environmental shocks) have larger impact on vulnerability to food insecurity. Based on the intensity of their vulnerability, households were grouped highly vulnerable-food secure (18.4 percent), and low vulnerable-food secure (45.84 percent).Overall, about 54.4 percent of households were categorized as vulnerable to food insecurity. Key words: Vulnerability as expected poverty, Vulnerability to food insecurity, Food insecurity, EthiopiaItem The Impact of External Debt on Foreign Direct Investment- Growth Nexus: The Case of Sub Saharan Africa(Addis Ababa University, 2022-06) Dessalegn Tsega; Sissay Debebe (PhD)Many developing countries now in the world gain an advantage and has been benefited from the world FDI so as to promote their economic growth. While, other developing countries like Sub Sahara African countries are set to be struggled with external debt crisis still now. Empirical studies on external debt and FDI has been done so far. However, the issue is still controversial and inconclusive, studied only at country as well as sub region level and previous studies did not take in to account that, which (debt or FDI) greatly affected economic growth in the region and also differ in the methodology they applied. Therefore, this study examines the impact of external debt on the inflow of foreign direct investment to SSA region and to identify the more impactful variable (external debt and FDI) on economic growth nexus using annual secondary panel data approach extracted from the WDI database from 2001-2020. The data were analyzed using descriptive statistics, as well as dynamic panel models of one step system-GMM approach. The validity of results was confirmed by the Arellano-Bond test for autocorrelation in the disturbance term and the Hansen and Sargan tests for the validity of instrumental variables. The results of the one step system GMM suggest that external debt exerts a negative impact on both FDI inflow and economic growth of SSA countries. The lagged FDI, external debt, trade openness, gross fixed capital formation, and exchange rate are factors significantly affecting the inflow of FDI. Economic growth in the region also significantly influenced by; previous year growth, external debt, infrastructure, and population growth. The study concludes and recommends that SSA countries should reduce their external borrowing utmost not beyond their maximum threshold level and thus should adopt and implement policies that favors in improving trade openness, rising domestic saving, attracting FDI inflow in order to finance their capital budget deficit and focusing on expanding infrastructure that will enhance productivity so as to improve economic growth. Keywords: FDI, External Debt, Economic Growth, System-GMM, Sub Saharan Africa.Item Determinants of Foreign Direct Investment Inflow to Ethiopia: A Time Series Analysis(Addis Ababa University, 2022-01) Yalew Mengistie; Mulugeta G/Mariam (PhD)The main aim of this paper is to identify the key determinant factors of FDI inflows to Ethiopia for the period 1991 to 2020 using autoregressive distributed lag model (ARDLM) with Error Correlation Methods. The empirical results reveal that trade openness, domestic market size, inflation rate, and political stability and absence of violence are the key determinant factors of FDI inflows to Ethiopia. Moreover, human capital and government effectiveness are also important determinant factors of FDI inflow in the short run, while infrastructure facility is a fundamental determinant factor in the long run. Among these factors, at 5% level of statistical significance, trade openness, and domestic market size affect FDI inflow positively both in the short run and long run, whereas inflation rate, and political stability and absence of violence have negative and statistically significant effect in both cases. On the other hand, government effectiveness and human capital associated with FDI inflow to Ethiopia positively in the short run. Besides, infrastructure facility development has statistically significant effect on FDI inflow in the long run. Hence, these findings implies that minimizing barriers to trade, improving domestic market size and infrastructure facilities, creating more stable macroeconomic and political environment, giving due attention to well-organized system of education, and having effective governance system are also crucial to attract more FDI to Ethiopia. Keywords: FDI, Ethiopia, Determinant, ARDL Model, Bound Test, ECMItem The Effect of Credit Constraints on Agricultural Input Technology Adoption of Farmers.(Addis Ababa University, 2023-06) Hikma Sultan; Sisay Debebe (PhD)Agricultural credit constraints hinder the adoption of modern input technologies and contribute to low agricultural productivity in developing nations, including Ethiopia. This study investigates the nature of credit constraints among smallholder farmers, factors influencing these constraints, and their impact on the adoption of Chemical fertilizer and agrochemicals. Using nationally representative LSMS-ISA data from 2200 smallholders, two econometric models (MNP and SUR) are employed to estimate credit constraint status and analyze input technology adoption. The findings reveal a significant experience of credit constraints, influenced by both supply-side and demand-side factors. Collateral ownership-related factors (e.g., livestock ownership, land use certificates) influence supply-side credit constraints, while literacy, remittance access, and agricultural extension services affect demand-side credit constraints. Moreover, credit constraints negatively affect the adoption of agrochemical input technology. Addressing credit constraints requires mitigating both supply-side and demand-side factors. Strengthening smallholders' capacity for bankable collateral ownership and providing information literacy, education, and agricultural extension services can alleviate these constraints. Resolving both demand-side and supply-side constraints can enhance credit access, increase the adoption of modern input technologies, and ultimately improve agricultural productivity. Policymakers should focus on targeted measures to enhance credit availability and access, thereby promoting sustainable agricultural development in Ethiopia. Keywords: Rural credit constraints, Agricultural input, adoption, Supply-side and demand-side, EthiopiaItem The Impact of Fiscal Decentralization on Economic Growth in Ethiopia(Addis Ababa University, 2022-06) Abdurahman Hassen; Sisay Debebe (PhD)Ethiopia embarked its journey of fiscal decentralization during the period of the Transitional Government of Ethiopia (TGE) and later, with the adoption of the 1995 Constitution of the Federal Democratic Republic of Ethiopia, fiscal decentralization was formalized. Two and a half decades after the 1995 Constitution, which set the path for fiscal decentralization in Ethiopia, no empirical evidence exists to prove whether fiscal decentralization has boosted economic growth or not. Thus, the main objective of this study is to investigate the impact of fiscal decentralization on economic growth in the Ethiopian context. The study used the Auto Regressive Distributed Lagged (ARDL) model to identify short and long run relationships between economic growth, fiscal decentralization, and chosen macroeconomic variables. The model was estimated using annual data of 25 years for the period ranging between 1996/97 to 2020/21. The model exhibits all of the characteristics of a good regression model. The model passed all serial correlation, normality, Heterosedasticity, and Ramsey RESET tests. The Long-run estimation of the econometric analysis shows statistically significant and positive relationship between GDP per capita and fiscal decentralization in Ethiopian case. Similarly, the short-run ARDL estimate indicates that fiscal decentralization is positively related with GDP per capita and it is statistically significant. The study suggests that government can use fiscal decentralization as one tool to increase economic growth by devolving fiscal responsibilities to lower levels of government, strengthening local level institutions and enhancing competency of lower level officials. Keywords: Fiscal Decentralization, Economic Growth, ARDL Model, Fiscal Imbalance, EthiopiaItem The Impact of Exchange Rate Fluctuation on International Trade: In Ethiopia(Addis Ababa University, 2022-06) Abraham Siltan; Berhanu Denu (PhD)This study investigates the impact of exchange rate fluctuation on international trade in Ethiopia. The research is carried out under the assumption that exchange rate fluctuations are deemed to impact the volume of export and import trading activities. The study made use of secondary data from 1980 to 2021; on the following variables real effective exchange rate (REER), exports (Exp), imports (Imp), real Gross Domestic Product (RGDP), and inflation rate. The data were analyzed using descriptive and econometric methods in this study. Descriptive statistical methods such as mean, standard deviation, and graphical comparisons were used for measuring trends of the real effective exchange rate to compare with export and import sectors. Econometric methods in line with the theoretical and Empirical framework discussed in the literature review section, the following technique are applied, Johansen co-integration technique, vector error correction model (VECM), Granger causality, and variance decomposition to capture both short-run and long-run impact of the exchange rate. The VECM was used to capture both short- and long-run interactions. The results revealed a significant and positive association between the real effective exchange rate, real gross domestic product, and export, but have a negative relationship between inflation and export. At the same time, there is a significant and positive relationship between inflation, real GDP, and imports. However, the real effective exchange rate and imports have a negative relationship. This paper finds evidence that exchange rate fluctuation is the main factor that affects the level of international trade as measured by export and import flows in Ethiopia. It appears that if policymakers wish to promote export and decrease imports to improve the balance of trade in Ethiopia, they have to keep an open eye on steady appreciation of the exchange rate and reduce volatility. Key words: Exchange Rate Volatility, International Trade, Export, and ImportItem Effects of Demonitizetion Instrumentson the Performance of Micro, Small and Medium Scale Enterprises in Ethiopia: The Case of Arada Subcity in Addis Ababa(Addis Ababa University, 2022-06) Adugna Alemayehu; Berhanu Denu (PHD)People are busy and talking about Demonetization and its effects on the profitability of MSMEs since there is a limitation on cash based economy which is replaced with a new advanced technology and then the study was intended to investigate the effects of demonetization instruments on performance of micro, small, and medium scale enterprises in Addis Ababa Arada sub-city. The study examines the recent trends of the effects of currency demonetization on the profitability of MSMEs. Taking a descriptive and explanatory research design, the study accomplishes the objectives by focusing on the owners of the MSMEs. The target population comprised of 619 MSMEs sectors which are legally registered in Arada sub-city. Stratified sampling method was used to calculate a sample size of 186 respondents because, it allows evaluating data from different subgroups or strata to obtain sample representing entire population and administered questionnaire. The descriptive data wereanalysed using frequency table and percentage, while linear regression analysis was used to test the relationship between the independent and the dependent variables or formulated hypothesis using SPSS V.26. From the findings, the study concluded that, POS, ATM, Internet Banking, Mobile Banking, and Tele birr has a positive effect and significantly influence the performance (profit) of MSMEs. Based on the findings, some recommendations among others made are; policy makers should strengthen the government policies and regulatory framework to create conducive climate during the process of demonetization. Creating awareness concerning the currency demonetization and encouraging and increasing usage of demonetization instruments, then the simple way that the society is going to the digitalization or cash less economy were created. Keywords; Demonetization, MSMEs, Mobile banking, Internet banking, Tele birr, POS, Performance of MSMEsItem The Impact of Population Growth on Ethiopian Economic Growth(Addis Ababa University, 2022-07) Asamerew Dejenie; Berhanu Denu (PhD)This study empirically investigates the impact of population growth on the economic performance of Ethiopia for the period 1991-2021. Demographic transition enables in creating policy environment that considers maximum advantage of the nation’s demographic potential. VECM model was used to investigate the relationship between the population growth and economic performance of the country. The result of the model shows that the impact of population is negative and significant and the problem associated with huge population growth is the flood of the newly workforce, its management and providing different facilities even basic needs become a challenge for the government and policy makers. To tackle this issue, this study incorporated unemployment rate and agricultural growth rate to the model so as to investigate the impact of population growth directly and indirectly on economic growth in Ethiopia. The result of the study shows that population growth has negatively and significantly contributed to economic development contrary to agriculture. Saving rate, trade openness and human capital are also positive and significant factors to economic growth in Ethiopia. Hence, the government is advised to effectively and efficiently utilize the abundant labor force and work hard to eradicate the prevailing high level of unemployment. Key words: Population growth, unemployment, economic growth, VECM, EthiopiaItem Monetary Policy Transnission Mechanism in Ethiopia: Structural Var Analysis(Addis Ababa University, 2022-07) Berhanu Berihun; Berhanu Denu (PhD)Monetary Policy is increasingly important to maintain price and exchange rate stability and support sustainable economic growth. The main objective of this paper was to study and identify the main transmission mechanism of monetary policy in Ethiopia. To achieve the objective, secondary source of data was collected using quarterly time series data from 2000/01Q1 to 2020/21Q4. Small open economy structural Vector Auto Regression (SVAR) model with two vectors of variables. All the variables are tested for unit roots using Augmented Dickey Fuller and the Phillips–Perron test and model stability and other necessary tests was conducted. The results of Structural impulse response and structural variance decompositions derived from Structural VAR show that direct monetary transmission which is the Reserve Money in case of output and reserve money, domestic credit and nominal effective exchange rate have significant impacts on price level in short term. The monetary aggregate (M2), the average lending rate, the reserve requirement and nominal effective exchange rate have significant impacts on output and price level in medium term in Ethiopia indicating that monetary policy transmission channel is effective in influencing macroeconomic variables in the Ethiopian economy. However, the results of interest rate channel-which is represented by the average lending rate in affecting output and price is not effective in short run relative to other channels. while the study also illustrates that the monetary aggregate contains important additional information in the transmission process of monetary policy shocks in Ethiopia. Key Words: Impulse, Monetary, Policy, Response, Decompositions, EthiopiaItem The Impact of External Debt on Foreign Direct Investment- Growth Nexus: The Case of Sub Saharan Africa(Addis Ababa University, 2022-07) Dessalegn Tsega; Sissay Debebe (PhD)Many developing countries now in the world gain an advantage and has been benefited from the world FDI so as to promote their economic growth. While, other developing countries like Sub Sahara African countries are set to be struggled with external debt crisis still now. Empirical studies on external debt and FDI has been done so far. However, the issue is still controversial and inconclusive, studied only at country as well as sub region level and previous studies did not take in to account that, which (debt or FDI) greatly affected economic growth in the region and also differ in the methodology they applied. Therefore, this study examines the impact of external debt on the inflow of foreign direct investment to SSA region and to identify the more impactful variable (external debt and FDI) on economic growth nexus using annual secondary panel data approach extracted from the WDI database from 2001-2020. The data were analyzed using descriptive statistics, as well as dynamic panel models of one step system-GMM approach. The validity of results was confirmed by the Arellano-Bond test for autocorrelation in the disturbance term and the Hansen and Sargan tests for the validity of instrumental variables. The results of the one step system GMM suggest that external debt exerts a negative impact on both FDI inflow and economic growth of SSA countries. The lagged FDI, external debt, trade openness, gross fixed capital formation, and exchange rate are factors significantly affecting the inflow of FDI. Economic growth in the region also significantly influenced by; previous year growth, external debt, infrastructure, and population growth. The study concludes and recommends that SSA countries should reduce their external borrowing utmost not beyond their maximum threshold level and thus should adopt and implement policies that favors in improving trade openness, rising domestic saving, attracting FDI inflow in order to finance their capital budget deficit and focusing on expanding infrastructure that will enhance productivity so as to improve economic growth. Keywords: FDI, External Debt, Economic Growth, System-GMM, Sub Saharan Africa.