Economics

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Determinants of Non-Performing Loans: The Case of Commercial Banks in Ethiopia
(A.A.U., 2023-06-09) Yordanos Belete Eshete; Sisay Regassa (PhD)
This study aims at investigating the determinants of non-performing loans in Ethiopian commercial banks from 2006 to 2021. The study used panel data on fourteen commercial banks obtained from the annual reports of each of the commercial banks and the national bank of Ethiopia. A fixed effect model was employed to analyses the determinants of NPLs. Results from the study indicate that capital adequacy ratio, loan growth, and return on assets have a negative and significant influence on NPLs. This study holds importance in bridging the research gap, as it is vital to understand the causes of NPLs to address the issue effectively. The study recommends that bank managers need to maintain a strong capital adequacy ratio, foster sound management practices to maximize return on assets, and establish comprehensive credit assessment and monitoring systems. These measures will help mitigate the risks associated with non-performing loans and support a stable banking sector, enabling banks to thrive and prosper in increasingly competitive financial markets.
The Effect of Political Instability on Economic Growth in Sub-Saharan African Countries
(A.A.U, 2022-06-08) Tsegayehu Agmasie; Abdurezack Hussein(PhD)
In this study, the relationships between political instability and economic growth in Sub Saharan African countries are deeply explored. Six individual political instability indicators from the World Bank’s world governance indicators database were used and aggregated into a single and more comprehensive political instability index by employing the techniques of principal component analysis. Then the impact of the composite political instability index on economic growth along with other economic variables are modeled by employing three simultaneous equations and estimated by dynamic panel GMM estimation approach which accounts for the endogeneity issues. The results from the GMM estimations reveal that political instability significantly hampers economic growth in SSA through its direct transmission mechanism by disrupting the available resources a country has at its disposal. The hypothesized indirect channel through which political instability negatively affects economic growth through FDI is found to be statistically insignificant. Panel causality tests along with the corresponding forecast error variance decompositions (FEVDs) and impulse response functions (IRFs) are performed to reinforce the results obtained from the GMM estimations. The results show that political instability and foreign direct investment (FDI) Granger-cause economic growth, while the reverse is not true. While it’s found that economic growth is the most endogenous of the main three target variables, FDI is the most exogenous one which is unresponsive to shocks of variables other than its own. The governments and policy makers of Sub Saharan African countries should target political instability as their policy variable since variations in the economic growth other than its own shocks are also explained by the shocks from political instability. Countries in SSA should not ignore factors leading to political instability and policies aimed at decreasing political instability should be pursued by these countries in order to maintain a stable economic growth.
The Impact of External Debt, Unemployment, and Inflation on Economic Growth: Evidence from Sub-Saharan African Countries
(A.A.U, 2022-06-08) Astaraki Animut; Helen Berga (PhD)
Achieving a high rate of economic growth, full employment, and price stability is key to macroeconomic policy objectives and a top priority for all countries worldwide. As a result, if these fundamental macroeconomic policy goals are to be realized, understanding the influence of external debt, unemployment, and inflation on economic growth is crucial. This study aims to examine the impact of external debt, unemployment, and inflation on economic growth in Sub-Saharan African countries. The study used panel data from thirty Sub-Saharan African countries from 2005 to 2019. The data were processed using STATA 15 software for the windows econometrics package. The researcher employed a dynamic panel regression model, the system generalized method of moments (system GMM) estimation strategy, and the Granger causality test. The study found that the three primary factors, external debt, unemployment, and inflation, have a significant negative relationship with economic growth in Sub-Saharan Africa. As external debt, unemployment, and inflation increased, all three variables had a detrimental influence on growth. Our results indicate that foreign debt, as a result of debt servicing, has a detrimental influence on growth by crowding out both private and governmental investment. This supports the debt-overhang hypothesis' applicability in the SSA African region. According to the findings, economic growth had no causal relationship with inflation, but it had a one-way causal relationship with unemployment and external debt which flowed from unemployment to economic growth and from economic growth to external debt.
A normal-Weighted Exponential Stochastic Frontier Model
(A.A.U, 2022-06-15) Misgan Desale; Adane Tufa (PhD)
This thesis introduces a new stochastic frontier model called a normal-weighted exponential stochastic frontier model. We have derived a closed form log-likelihood function and JLMS inefficiency estimator of a normal-weighted exponential stochastic frontier model. In addition, we have derived the gradient and hessian matrix of a normal-weighted exponential stochastic frontier model. A Monte Carlo (MC) simulation is carried out to verify the correctness of the derivations, of a normal-weighted exponential stochastic frontier model, and to study the finite sample properties of maximum likelihood estimator. Our simulation result shows that a normal weighted exponential stochastic frontier model performs well compared to a normal-exponential stochastic frontier model. In our simulation result, it shows that as sample size increases the bias and standard errors decreases. Moreover, a real data application is performed, and it is about estimation of carbon efficiency of manufacturing firms in Africa. We have estimated an input requirement production function, using fuel consumption as dependent variable and output and other inputs as independent variables. Our estimated result shows that the estimates of coefficients are the same across models. However, there is differences in carbon efficiency estimates of manufacturing firms. Using a normal-half normal stochastic frontier model, a carbon efficiency of manufacturing firms in Africa gives an estimate ranging between 1.002344 (99.8984%) and 1.002362 (99.8976%). For a normal-exponential stochastic frontier model the range of carbon inefficiency estimates are between 1.074752 (97.5092%) and 1.090364 (96.3126%). Similarly, for a normal-weighted exponential stochastic frontier model the carbon inefficiency estimates are between 1.122895 (95.0907%) and 1.237519 (91.1602%). We have used the carbon efficiency estimates to rank African countries and Egypt is the most carbon efficient country in Africa. We have also run a multiple linear regression on carbon inefficiency estimates to see the determinants. In all three stochastic frontier models: top manager work experience, obstacle to access finance, firm size, export status, and foreign ownership are the key determinants.
The Impact of COVID-19 on the Financial Sector: The Case of Private Commercial Banks in Ethiopia
(AAU, 2023-12-09) Niya Getachew; Migbaru Alamerewu PhD
The outbreak of a new strain of Coronavirus, now known as COVID-19, which has been classified as a global pandemic by the World Health Organization (WHO), has frightened the world. One aspect of the economy that is hit hard by the pandemic and its resultant outcome is the service sector. In Ethiopia, the financial sector faced a challenge by slowing the market, in particular by stalling its economic growth. This paper aims to examine the impact of covid-19 on the performance of the private commercial banking sector in Ethiopia concerning its key performance indicators. Mainly banking performance in return on investment, assets, and net interest margins. This study used DiD model to analyze the data obtained in the study. The DID analysis was employed to assess private banking sector growth in main indicators of performance before (2014-2018) and after Covid (2019-2021). The results indicate thattheDiD estimation model shows that the pandemic affected ROA and ROE negatively. However, the impact was not statistically significant during the study period. The other factor is NIM. In this factor, although it was affected positively the level of significance is low. Thus, it can be concluded that the pandemic has not affected the performance of the private commercial banks during the study period in a meaningful way. But the government is recommended to highly follow up on the banking financial sector to sustain shocks in the economy. This will lead to a sustainable economic outcome and growth for the private financial sector
Environment and Migration, Evidence from Ethiopian.
(A.A.U, 2022-06-06) Abebe Wubetu; Mekonnen Bersisa (PhD)
The issue of environmentally induced migration and displacement is a significant part of a significant policy debate internationally. In Ethiopia, little attention has been given to policy alternatives with regard to environmental degradation, although the severity of human life associated with environmental problems has shown a dramatic increment over the last couple of years. This paper aims to analyze the impact of the environment on both internal and international migration stocks. Coefficients of explanatory variables that have an impact on internal migration were estimated using static panel data models such as random effects regression. The SYSTEM GMM estimation technique was applied to a gravity model of international migration over the years 2000 to 2020. Based on the stata regression results, some of the environmental variables were found to have a significant effect on both internal and international migration. While standardized precipitation, sudden-onset hazards, slow-onset hazards, and conflict have a significant correlation with internal migration, we could not find any significant association between temperature anomalies and internal migration. The pooled OLS regression results of the gravity model showed that the sudden-onset hazards ratio, slow onset hazards ratio, distance, GDP ratio, amenity index ratio, and political risk ratio had a significant relationship with international migration. Based on the Arellano-Bover/Bond estimation technique, distance, and GDP ratio(the two major gravity variables), slow-onset hazards ratio, amenity index ratio, air pollution exposure, and political risk index turned out to be significant. However, the effect of population ratio, unemployment ratio, and rainfall anomaly index on international migration stock was not significant.
Households’ Willingness to Pay for Improved SWM in Addis Ababa, Kolfe Keraniyo Sub City
(A.A.U, 2022-02-13) Getahun Seid; Adana Tufa (PhD)
Designing improved solid waste collection service in Addis Ababa city is vital for to improve the quality of life and welfare of the residents. However, households in all sub cities are dissatisfied with the current solid waste collection and the budget gap prevents enhanced solid waste collection service. It is necessary to create an improved solid waste collection system in order to satisfy households and reduce budget gaps in solid waste collection service. This study contributes by introducing an alternative collection service so as to improve solid waste management and to fill the budget gap of the city. This study was undertaken to investigate households’ willingness for new and improved solid waste management in Kolfe Keraniyo Sub-City, Addis Ababa. The study used both cross-sectional survey design and quantitative approach. It also used both secondary and primary data sources. The primary data was collected via questionnaire. Stratified and simple random sampling techniques were applied. The Tobit model was applied to analyze the factors influencing households’ willingness to pay decisions for improved solid waste management in Addis Ababa, particularly in Kolfe Keraniyo Sub-City. The results show that households’ willingness to pay for new improved solid waste management in Kolfe Keraniyo Sub-City is significantly influenced by household income, size and age. The result also confirmed that education and number of household members have job were related with households’ willingness to pay. Furthermore, households were on average willingness to pay Birr 31.1 million per month and Birr 373.2 million per year. Among others, the study suggests that in order to fix the price for the improved urban household solid waste collection service the municipality could use mean and maximum willingness to pay fee to charge on every low income and every high-income households, respectively. So that the municipal agency will improve households’ solid waste collection service and narrow the budget gap.
The effects of liquidity risks and interest rates risks on profitability: Evidence from Ethiopian banks.
(AAU, 2023-06-18) : Dagem Fisseha; Jemberu Lulie (PhD)
This paper examined the effect liquidity risk and interest rate risk in selected Ethiopian commercial banks by analyzing how liquidity risk measures such as loan to deposit ratio and liquid asset to total asset ratio and, interest rate risk measures such as net interest margin and asset interest yield affect a bank’s profitability measures return on assets and return on equity. The study's primary goals were to comprehend how liquidity risk and interest rate risk affect the profitability of Ethiopian commercial banks and to provide a foundation for further investigation of interest rate risk. To analyze the effects the study used an unbalanced panel data for a sample of 17 banks that have been operating for at least 10 years for the period 2010-2022. The study therefore has determined that liquidity risk does not have a significant effect on profitability for the selected Ethiopian banks in the given period when interest rate risk effects are also captured. The results also show that the net interest margin and asset interest yield have a positive effect on profitability measures. The implication being that interest rate risk which is inversely captured by net interest margin and asset interest yield, has a negative effect on profitability of the selected banks
Food Insecurity Dynamics in Ethiopia: A System Dynamics Approach, Addis Ababa, Ethiopia
(AAU, 2023-06-10) Yabtsega Desalegn; Helen Berga (Phd)
Food security is a dynamic concept that has continuously integrated new dimensions and levels of analysis over the years; this reflects the wider recognition of its complexities in research and public policy issues. Food security is achieved when all people, at all times, have physical and economic access to sufficient, safe, and nutritious food that meets their dietary needs and food preferences for an active and healthy life. Food insecurity occurs at the individual, household, or nation level for those who have neither physical nor economic access to the nourishment they need. Food insecurity is an enduring and critical challenge in Ethiopia, which is Africa’s second most populous country after Nigeria. This study has assessed the trends and status of the complex issue of food insecurity at a national level, listed out the major influencing factors that form the causal relationship using the green economy framework, and identified policy-related issues using system dynamics that have assisted in addressing and investigating this problem as it has unfolded in the various causal relationships that will be used for further analysis in the definition of future policy options and testing of these policy options. The policy test was conducted on three aspects of the green economy: social, economic, and environmental. This study finds that food insecurity and malnutrition are more sensitive to the issue of increasing human capital through the social aspect, namely access to basic health care and the educational sector, which has a reinforcing effect, and also suggests the environmental aspect of decreasing the food waste emission rate to lower GHG emissions, which has a long-term effect on yield. Overall, this study suggests that food policies go beyond casualties and require long-term policy development in order to deal with Ethiopia's highest prevalence of Food insecurity
The Impact of Withdrawal from the African Growth and Opportunity Act on Ethiopian Economy
(A.A.U., 2023-02-02) Anteneh Girma; Abebe Yitayew (Ph.D.)
For many years, the US and Sub-Saharan Africa have not had strong trade and investment relations. In 2000, the African Growth Opportunity Act (AGOA) was introduced to promote public Act 106-200, whose goal has benefited the Sub-Saharan African Countries by eliminating the trade barriers, duties, levies, and quotas that would encourage trade between these countries. AGOA is a unilateral and non-reciprocal trade program that gives eligible Sub-Saharan African (SSA) countries the export of goods to the United States. The primary objectives of AGOA are to promote Sub-Saharan Africa's economies and improve economic relations between the United States and the SSA. But in the other way, AGOA is a tool to execute U.S. interests in Africa. So AGOA as an instrument of American domination over sub-Saharan Africa in their trade and investment. It is a good example of interfering in Ethiopia's internal issues direct in the name of AGOA. As a result, AGOA is more of a political tool than a tool for promoting trade between the U.S. and SSA. On paper, the AGOA is to encourage exports of African products, and open markets, and promote inclusive development, solid regional integration, and good governance on the continent of Africa. However, there has been significant growth in U.S. content domination since its inception, especially in Ethiopia. The point must make that SSA no longer needs aid; what we need in Ethiopia and other African countries is trade. This thesis shows the impact of withdrawal from AGOA on the Ethiopian Economy and what is another alternative available to the country. This research uses a quantitative and qualitative methods. Secondary data was the main data for this research. The researcher choose a purposive sampling technique that involves examining the entire population that has a particular set of characteristics to import and export data since AGOA was enacted. The data are collected through official Statistics, AGOA annual reports, previous research publications & annual reports
Does Extrrnal Public Debt Affect Ethiopla's Economic Growth?
(A.A.U, 2023-06-06) Leulseged Abebe; Dr. Abdurezack Hussein
Ethiopia is a highly indebted poor country (HIPC), but empirical research concerning about the relationship between external debt and growth is lacking and ambiguous. In the current research, Auto-Regressive Distributed Lag Model (ARDL) is used to evaluate the connection between Ethiopia's real GDP and external debt, utilizing yearly time series secondary data beginning from 1985 to 2021. The outcome demonstrates that the total stock of external debt has a significant negative relationship with its real GDP. However, the aggregate amount of lagged debt service has a short-run positive influence on the country’s economic growth. This reveals there is a debt overhang effect but not a crowding-out impact. Additionally, labor force and internal conflict exert a negative influence on the nation's real GDP in the short run, while gross capital formation and trade openness have a positive impact. Only gross capital formation and total amount of external debt have long-run positive and negative relationship with real GDP, respectively. The study provides a definite response to the topic of how foreign public debt affects Ethiopian economic growth
The Effect of Exchange Rate, Interest Rate, & Inflation on Economic Growth: Evidence from the Ethiopian Economy
(A.A.U., 2023-07-05) Kiros Seyoum Abreham; Helen Berga (Ph.D)
The research investigated the effect of exchange rate, lending interest rate, and inflation on the economic growth of Ethiopia, using data from 1982 to 2021. The independent variables included exchange rate, lending interest rate, inflation rate, government expenditure, gross capital formation, and foreign direct investment, with economic growth functioning as the dependent variable. Integration levels in the time series were determined through the Philips-Perron (PP) and Augmented Dickey-Fuller (ADF) unit root tests. The Auto regressive Distributed Lag (ARDL) and its Error Correction Model (ECM) were applied to discern long run and short-run relationships. The study identified both long run and short-run relationships within the assessed model. It revealed that over time, the exchange rate has a considerably positive influence on economic growth. In contrast, to initial years in the short run, the exchange rate exhibits a negative and significant effect at both lag 1 and lag 2. Regarding inflation, its effect on economic growth is not significant in the long run. However, in the short run, it has a significant and negative effect, particularly with a one-period time delay (lag1). Lastly, lending interest rates have a negative and significant effect on economic growth in both the short and long run. In addition, the research investigated whether there is a statistically significant threshold level of inflation that influences growth in Ethiopia differently, based on whether it falls below or above this level. The study used time series data from 1982 to 2021 and the Ordinary Least Squares (OLS) technique to analyze this. The findings confirmed a maximum threshold of 7 percent for a positive relationship between the two variables. However, when inflation rates exceed 7 percent, the relationship turns negative. The research findings indicate that for promoting economic growth in Ethiopia, it is essential for the Ministry of Finance (MOF) and National Bank of Ethiopia (NBE) the to adopt policy suggestions such as ensuring a stable exchange rate, controlling lending interest rates, and targeting inflation rates below 7%. It is advised that monetary and fiscal policy creators pay attention to the insights offered, which would assist them in formulating efficient strategies to manage these microeconomic indicators effectively, ultimately contributing to the country's economic growth. By adopting a coordinated strategy that integrates these policies, Ethiopia can attain sustainable growth. To ensure the effectiveness of these measures, continual evaluation and adjustments are essential.
Financial Development and Economic Growth in Africa: A Cross-Country Evidence
(A.A.U., 2023-02-04) Beidemaryam Wondwosen; Girma Estiphanos (Ph.D)
This study empirically examines the relationship between financial development and economic growth using a cross-country panel data analysis of 39 African countries. The aggregate economic growth indicator and the proxy variables for the financial development indicator are only considered for bank-based measures. To measure the level of financial development, the study uses two proxies, private sector credit to GDP and the index of financial development. Accordingly, the results show that the development of the financial sector has a positive and statistically significant effect on the economic growth of African countries for the two variables. The IV estimation results suggest that weak institutions and inadequate government regulation could distort economic decision-making and reduce productivity by hampering financial development. The finding also showed a significant positive coefficient attributed to the financial development indicator and the negative coefficient attributed to its squared value demonstrated the non-linearity of the relationship with financial development and growth. As a final point, the nonlinear relationship shows that when formulating economic growth strategies, we should consider the optimal level of financial development. The results for control variables suggests that foreign direct investment inflows, savings, trade openness, population and capital formation play important roles in boosting economic growth in African countries. However, increases in government size and inflation are detrimental to the economic growth of the same countries. Based on these findings, the study proposes the expansion of financial services through more lending to the private sector. The government should limit its size in the economy; savings in the economy should be channelled into productive investments; and it should manage the exchange rate and price of items in international trade to protect local producers and avoid imported inflation.
A System Dynamic Analysis for Cement Production and Carbon Emissions in Ethiopia
(AAU, 2023-06-01) Shimelis Fikre; Alemu Lambamo (PhD)
Cement production in Ethiopia is backbone for economic development by constructing large projects such as Grand Ethiopian Renaissance Dam (GERD), Mega Projects, road, etc. Conversely, the concentration of CO2 emissions from cement sector is challenging issue to future climate changes. Over time the demand for cement is increasing for housing and infrastructure development, while the productivity of cement production among the factory is yet poor. Most cement industry in Ethiopia use combustion of imported fossil fuels. However, these leads to high concentration of CO2 emission, productions inefficiency, high cost of operations, loss of productions due to various problem such as shortage of power, spare part, etc. and vulnerability to climate change severity in Ethiopia. This study simulates and develops System Dynamic Model for cement sector to explore endogenous behavior of variables within the model, using Causal Loop Diagram and Stock-Flow Diagram. According to simulation of this study, at end of 2030 the CO2 emission from cement industry is more than double, about 8.92mill. tonsCO2 as compared to 4.37 mill. tonsCO2 in 2022, as well cement production also doubles at the end of 2030 about 16.28 mill. tons. Thus, depict that the carbon emissions proportionally increasing with cement productions. Therefore, the study recommends to utilizes alternative renewable energy resource and modern technological kiln processor to improve their energy efficacy and more productive as well as cope environmental burden of carbon emissions from cement sector of Ethiopia.
A Path to Low Carbon and Climate Friendly Transport Sector in Addis Ababa: System Dynamics Approach
(AAU, 2023-06-18) Kaleab Enyew; Mengesha Yayo (PhD)
Urban transportation system is a complex system with multiple variables and nonlinear feedback loops and influenced by transportation, social, economic, and environmental factors. Conventional transportation modeling approaches are unsuitable to simulate and evaluate its performance. This paper presents a system dynamics approach based on the cause-and-effect analysis and feedback loop structures. The proposed SD model comprises population, economic development, number of vehicles, environmental influence, travel demand and transport supply. The model runs in Vensim PLE software using the data from Addis Ababa, Ethiopia. The impacts of different policy scenarios on transportation system related carbon emission are analyzed. Ban imports of used vehicle, Energy shift and setting emission standard have the capacity to reduce carbon emission with the magnitude of 17%, 59% and 43% respectively by 2030. The study suggests that a combination of policies to achieve a low carbon and climate-friendly transport sector which will result a 74% decrease in carbon emission by 2030
The Effect of Financial Technology on Economic Growth in Selective Sub-Sahara Countries,
(A.A.U, 2023-06-09) Tsige Taddese; Jonse Boka(PhD)
The use of financial technology, or fintech, in sub-Saharan Africa (SSA) during the past few years has significantly altered the region's access to and provision of financial services. This study used two-step systems GMM to examine the relationship between SSA's economic growth between 2010 and 2021 and the use of fintech. In order to examine the causal relationships between fintech and economic growth, the study also applied the Granger non-causality Test. According to the findings, financial accessibility mediates the benefits of fintech on economic growth in SSA nations, where it is favorably and significantly associated with fintech usage. The effects are unidirectional running from fintech to economic growth. Therefore, an increase in fintech will promote economic growth in sub-Saharan Africa, necessitating the adoption and application of policies and initiatives that promote fintech in SSA. Fintech should benefit everyone equally; hence it is important to continue prioritizing initiatives to increase financial inclusion.
Does Female Labour Force Participation Affect Income Inequality in Sub-Sharan African Countries: Empirical and Lysis
(A.A.U, 2023-06-11) Mastewal Mulugeta; Dr. Tewodros Negash
This paper examines the impact of female labor force participation on income inequality using a random effect panel data model. The study uses data from selected 12 sub-Sharan countries and employs descriptive and econometric methods to investigate the relationship between income inequality and Female Labor Force Participation Rate alongside with potential variables that affect income inequality and assessing the relationship with GDP per capita, Inflation, Human Development Index, and Population Growth Rate. The results of the study indicate that there is a negative relationship between female labor force participation and income inequality. Additionally, there is a negative relationship between population growth rate and income inequality, and a negative relationship between human development index and income inequality. However, there is a positive but statistically insignificant relationship between GDP per capita and income inequality, as well as a positive but statistically insignificant relationship between inflation and income inequality. Based on these findings, the study recommends policies that promote female labor force participation to reduce income inequality
Nexus Between Inflation Public Debt and Economic Growth In Ethiopia
(A.A.U, 2023-09-09) Simenew Erkyhun; Dr. Helen Berga
Ethiopian Economy prior to 2002/03 exhibited moderate and stable inflation, However, a continuing rise in prices and strong economic expansion have been observed since 2002/3.Based on this circumstance and growing stock of public debt, this study examined causal relationships between inflation and public debt, public debt and growth, and between inflation and economic growth in Ethiopia. The estimation has been carried out by using Autoregressive Distributed Lag (ARDL) and Error Correction Method (ECM) using time series data set spanning from 1981 to 2021. To show the directional relationship between variables, the Granger causality test was used. The results indicated the existence of a long run relationship among the variables. Inflation level from 3.5 to 20 percent is important for long run real GDP growth. In the short-run, a rise in price discourages economic growth in Ethiopia. There is a short run causality running from inflation to real Gross Domestic Product; and in the long run economic growth and inflation move together. Trade openness has both long and short run negative impact on real GDP. Domestic public debt inversely affects real GDP growth in short term; in the long run external public debt has negative impact on Real GDP growth. The short run, long run and ECM estimates all agree over significance and causation: inflation and external public debt estimates have inverse and significant relationship, while inflation and real GDP have positive and significant long run relationship. The speed, at which real GDP returns to equilibrium after changes in inflation, public debt and other control variable, as measured by ECM, is 0.23 percent, indicating the strength of the economy’s ability to accommodate shocks. The casualty results indicate that, there is a long-term unidirectional causal relationship between inflation and real GDP growth as well as a unidirectional relationship between domestic public debts to inflation. Inflation and domestic public debt were found to have a long-term one-way causal relationship with economic growth. Based on the study's findings, policies should be designed to ensure price level with in threshold level (3.5-20) percent. Additionally, policymakers should work together to improve output in order to lower prices for goods and services and promote economic growth with managed public debt.
The Impacts of Climate Change on Small Holder’s Crop Production in Major Crop Producer Zones in Ethiopia: A Dynamic Panel Data Approach
(A.A.U, 2023-06-19) Lewoye Bantie; Abrha Magos (PhD)
The frequency of climatic risks is increasing as a result of climate change. There is a need to assess their impacts on each major crop producer zones in Ethiopia. This paper examined the impacts of climate change on crop production of private peasant holders focusing on cereals, pulse, oilseed, and vegetables in the cases of major selected crop producer zones in Ethiopia. One-step system GMM and Two-step system GMM were used to assess the impacts of climate change on cereal production from the period 2003/04-2021/22 for 21 selected zones from Amhara region, Oromia region, Binishangul Gumuz, SNNP, and Sidama region. We have estimated cereal production, pulse production, oilseed production, and vegetable production. The researcher concluded that lagged total production of cereals, number of private peasant holders, area in hectares, fertilizer, precipitation, Maximum average temperature; relative humidity, and regional dummy variables are the most significant factors that affect the production of cereals in major cereal producer zone in Ethiopia in the case of private peasant holders. Precipitation has adverse effects on cereals, pulse, and oilseed production. At first glance, the study suggested that the private peasant should not only depend on rain-fed cereals, pulse, and oilseed production instead they have to use erratic rainfall as opportunities for building small-sized irrigation dams. Finally, the author suggested that their irrigated land area will be insurance for their rain-fed agriculture if and only if they accumulated heavy rainfall. The author suggested to private peasant holders to use temperature resistance crop types through communicating with the Kebels, Wereda, and Zones base Administrations. The university across each zone has to introduce initiatives across each Woredas by supporting farmers to identify which types of seed they are adopting i.e. improved seed adaptation and traditional seed adaptation.
Essays on innovations, firm Productivity, and Employment In the context of Africa
(A.A.U, 2023-08-10) Mezid Nasir Keraga; Andreas Stephan (Prof.)
Seemingly contentious views are mainstreamed in the literature regarding the most important sources for productivity changes in general. More precisely, it is reasonable to inquire why there are differences in productivity across countries, sectors, and businesses. This study mainly aims to investigate factors that could explain firms’ heterogeneity in Ethiopia. In line with this main objective, it also intends to provide empirical evidence about the impact of innovations on firm-level productivity and to identify sources of firm-level innovations in the developing countries context. Moreover, this study attempts to answer two key research questions: Does devaluation have a long-term impact on the performance of an exporting firm? And, is there any trade-off between firm-level innovation and employment in the context of Africa? To meet those objectives and to address the research questions mentioned above, four independent but interrelated studies were compiled in this dissertation. For all papers, panel data-sets are utilized, which allow to capture firm-specific fixed effects and track the changes in productivity within a firm over time. Total factor productivity (TFP) was estimated using control function estimators. To disentangle the effect of devaluation on firms’ productivity, four waves of a panel data-set of large and medium scale manufacturing (LMSM) firms of Ethiopia are used and a quasi-experimental technique with time-invariant exporters as a treatment group has been applied. To examine the interrelationship between research & development (R&D), information and communication technology (ICT), innovation, and productivity, we used two waves (2011 and 2015) of the World Bank (WB) enterprise survey (ES) data-set. The interrelationship between variables of interest were modelled as general structural equation model (GSEM) and were estimated using a fixed effect estimator. Finally, the impact of firm-level innovation and its spillover effects on employment was investigated using a panel data-set of the WB for six African countries. To establish the impact, a difference in difference (DID) estimator is applied in combination with matching. Results from the first paper indicated that devaluation does not have a strong long-term impact on exporting firms’ performance, but exporting firms are more productive than import-intensive firms in the post-devaluation period. We also found that R&D, innovations, and firm productivity are linked and the linkage between firm-level innovations and productivity is strong and robust. Thus, innovation is key to enhance firm-level productivity. Furthermore, our findings indicate that ICT increase firm-level innovations, and it has also a direct positive impact on firm’s productivity. Finally, we provide robust new evidence that innovations expand employment in the African context, and innovative firms have also positive intra-industry employment spillover effects. Policy implications of each paper’s findings are presented and discussed at the end of each chapter.

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