Economics

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A Path to Low Carbon and Climate Friendly Transport Sector in Addis Ababa: System Dynamics Approach
(AAU, 2023-06-15) 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 Liberalization on Economic Development in Ethiopia
(A.A.U, 2023-07-21) Markos Taye; AtlawAlemu (PhD)
The financial system is necessary for economic expansion. The financial system facilitates lending and borrowing of money, which fosters economic progress. The goal of the study is toevaluate the effects of the different financial liberalization initiatives using co-integration and causality tests on Ethiopia's financial and economic progress over the period of 1992-2022. In doing so, the ARDL approach to Co-integration and Error Correction Model were employed to investigate the long run and short run relationships.Accordingly results of this study suggest that commercial banks' real-time total deposits have a considerable influence on the loans they offer. On the other hand, the provision of credit by banks has a very positive effect on the expansion of the country's industrial development. The real loan rate has a significant influence in determining the contribution of the industrial sector to real GDP. The study also found that the credit deposit ratio of banks significantly influenced the growth of the industrial sector. The composite financial liberalization index is positively correlated with bank credit extensions, real GDP, and industrial development. The study's findings also indicate that the poorest segment of the population is not being helped by an increase of bank branches through the provision of financial resources
Shocks, Well- Idiosyncratic Being And Labour Market Outcomes in Sub-Saharan Africa
(A.A.U, 2024-06-20) Gidisa Lachisa; Yonas Alem (PhD)
Households in developing countries are subject to considerable risk and shocks, but most can’t deal with them using formal credit and insurance mechanisms. We use five rounds of the South African NIDS panel data and investigate the links between shocks and mental health as measured by the Center for Epidemiological Studies – Depression Scale (CES-D). We find that experiencing idiosyncratic shocks, more importantly, the death of a family member is significantly associated with poor mental health. The magnitude increases by almost two-fold when death happens unexpectedly, i.e., due to an accident or violence, and increases by 35% when the deceased is a close family member of the respondent. We argue that two plausible mechanisms could explain the links between the death of a household member and mental health – bereavement and loss of income. Our results offer suggestive evidence of the large scope for improving welfare further through social support and insurance mechanisms. The results also imply the importance of expanding psychiatric and therapeutic care in Africa, which currently appears to be at the lowest level compared to the rest of the world.
The Contributions of Banking Sector Development to Economic Growth in Ethiopia
(A.A.U, 2024-06-27) Hirko Tesfaye Feyisa; Befekadu Degefe(PhD)
This study examines a contribution of banking sector development on growth of economy in Ethiopia. It makes used time series data of all banks from 1991-2022. The banking sector system mobilized resources in deposit, borrowing, and loan collection, reaching Birr 626.6 billion. Private Banks increased their share in deposit mobilization to 47.7%, with CBE accounting for 53.3%. Reserve mobilization through borrowing remained insignificant. The banking sector's outstanding credit grew by 23.9% to Birr 1.6 trillion, with the number of banks opening 1600 new branches in 2022. Depending on the nature of a banking sector development indicators the researcher selects five independent variables such as Bank size (Asset), Deposit, Loan to deposit ratio, return on asset, Capital accumulations and some Control variables i.e. Export, Investment, Money supply, inflation rate and Labor are employed in the thesis. Dependent variable is a proxy of economic expansion (RGDP). A unit root test satisfies the stationarity of data in the model and Granger causality test has demonstrated there are Unidirectional causes, meaning that all independent variables influence the dependent variable in one direction. The regression results of independent variable coefficients are to have a positive reaction to a dependent variable or to a model of economic growth RGDP. In the same way, within the specified period of time, there was a negative contribution from Loan to deposit ratio, labor and inflation on economic growth. Banking sector is positively contributes to overall economic growth in Ethiopia.
The Impact of Industry Concentration on Performance of the Ethiopian Banking Industry
(A.A.U, 2025-02-17) Addisu Habte; Worku Gebeyehu (PhD)
This study examines the impact of industry concentration on the performance of the Ethiopian banking industry. The primary research question revolves around the impact of market concentration and relative market share versus bank efficiency in determining profitability and operational outcomes. Key performance metrics, including Return on Assets (ROA) and Net Interest Margin (NIM), were analyzed through a system Generalized Method of Moments (GMM) regression approach using Stata software Version 15. Additionally, MaxDEA Software was employed to compute efficiency scores, particularly technical, scale, and management efficiency, for each bank. The findings reveal that market concentration, represented by the Herfindahl-Hirschman Index (HHI), has a positive and significant effect on both ROA and NIM. This suggests that more concentrated markets enable higher profitability and wider interest margins, which supports elements of the Structure-Conduct-Performance (SCP) hypothesis. However, the negative and significant relationship between market share and bank performance calls into question the validity of the Market Power Hypothesis (MPH), implying that while larger banks enjoy some collusive advantages, individual market share does not necessarily translate into higher performance. From an efficiency standpoint, the results indicate that neither technical efficiency nor scale efficiency has a statistically significant impact on profitability, which challenges the Efficiency Structure Hypothesis (ESH). Interestingly, management efficiency demonstrates a positive and significant influence on both ROA and NIM, underscoring the importance of sound management practices in the banking sector. This research contributes to the ongoing debate about the drivers of bank performance in emerging markets, offering evidence that market concentration and managerial efficiency play crucial roles in shaping outcomes, while technical and scale efficiency are less decisive. The study emphasizes the need for enhanced competition and improved managerial practices within the Ethiopian banking industry to foster sustainable growth and profitability. Key words: Structure, conduct, performance, bank, efficiency, concentration, DEA
The Role of Banking Sector in Capital Accumulation and Economic Growth of Ethiopia: An ARDL Approach
(A.A.U, 2024-06-02) Bonche Bolla; Advisor: Alemu. L (PhD)
This study uses the financial sector development indicator variables of deposit, loan, asset, and profit as explanatory factors and RGDP as a dependent variable to examine the empirical relationship between the banking industry and Ethiopia's economic growth. Using time series data covering the years 1980–2022, the paper empirically evaluates the contribution of the banking industry to capital accumulation and economic growth in Ethiopia. Unit root examinations, cointegration tests utilizing the ARDL approach, Granger non-causality tests, and VECM dynamics investigations of the short- and long-term dynamics are all included in the model estimate process. The analysis's result demonstrates that, although credit only has a substantial impact on short-term capital accumulation, deposits have a significantly favorable short-term impact on both economic growth and capital accumulation. However, aside from deposits, a well-designed quantitative technique has the advantage of making findings reliable and lessening the impact of researcher and subject biases, especially when the research purpose is to analyse the problems and function of the banking sector in capital accumulation and economic progress. There is unidirectional linkage that exists between credit and economic growth, although there is a reciprocal causal connection between deposits and economic expansion, according to the analysis done to ascertain the cause and effect direction. Thus, the study recommends policymakers to strengthen the sector's capacity in a manner that would effectively distribute funds to the economy's most productive sector and mobilize larger savings in order to achieve rapid capital accumulation and sustainable economic growth. In the short run, gross national saving makes a substantial and positive contribution to capital accumulation and economic growth; however, over time, this contribution diminishes and becomes less significant. On the other hand, government expenditure has a significant long- and short-term influence on capital formation; nevertheless, it has a negligibly favorable long-term impact on economic growth and a substantially negative short-term impact.
The Impact of Credit Constraint on Micro and Small Business Enterprises Performance: The Case of Hawassa City Administration, Sidama Region.
(A.A.U, 2024-06-13) Simret Siyoum; Wassie Birhanu (PhD)
Micro- and small-sized enterprises play a critical role in creating job opportunities for millions of young people and attaining Ethiopia's development goals. The study uses a sample survey of 348 operators selected using multistage random sampling procedures to investigate the factors that influence the performance of MSEs in the Hawassa city administration. The cross-tabulated descriptive statistics revealed that personal/managerial characteristics, MSE characteristics, networking, and borrower economic resources all had an impact on MSEs' access to credit. The study investigates the effects of credit on the performance of MSEs in the Hawassa city administration. Propensity score matching was utilized to determine the impact of credit on MSE performance when comparing constraint and unconstrained MSEs. In this setting, it was found that credit had a positive and considerable impact on MSEs yearly average sales growth comparing with constraint MSEs but this finding does not find any significant relationship between the use of credit and employment growth. Hence, it was recommended that collaboration among enterprises, trade associations, and educational institutions should be encouraged. Moreover, enterprises should be able to receive non-financial support services like networking opportunities, business advice, and mentoring. Keywords: MSE, Impact, Credit, Hawassa, Propensity Score Matching
Dynamic Effects of Fiscal Deficit Financing on inflation in Ethiopia: Markov Regime-Switching Model Approach
(A.A.U, 2024-06-08) Yomif Tadesse; Mesele Araya(PhD)
Ethiopia’s rapid economic growth over the past two decades has been accompanied by a persistent fiscal deficit and soaring inflation, which raised concern about the sustainability of the growth path in the face of inflationary pressure. Thus, examining the relationship between inflation and fiscal deficit financing has drawn substantial attention from researchers and scholars, as financing budget deficits is confirmed both in theoretical and empirical literature to often lead to higher inflation. This study examines the dynamic effects of fiscal deficit financing on inflation in Ethiopia using a Markov regime-switching model (MRSM) approach to capture the nonlinear relationship between fiscal deficit financing and inflation. The Fiscal Theory of Price Level (FTPL) was adopted as a theoretical framework in this research. FTPL is a macroeconomic postulation that highlights the consequences of the dominance of fiscal policy activities over monetary policy and its effect on price stability due to the government's deficit financing. The maximum likelihood estimation (MLE) method has been used to estimate the model for the time series dataset spanning the period from 1980 to 2022. The paper revealed the presence of two fiscal regimes in Ethiopia and the inconsistency in the regimes of fiscal deficit financing over the study period. The findings of this study further indicate that fiscal deficit financing has a stronger impact under the higher regime of deficit financing, whereas, in the lower regime of fiscal deficit financing, the impact of financing government budget deficits on inflation over the study period remains muted in Ethiopia. Keeping other things constant, budget deficit financing increases inflation by 0.9230973 (92%) under a high regime of fiscal deficfinancing, while in a low regime of fiscal deficit financing, deficit financing causes inflation to rise by 0.0867 (8.67%) in Ethiopia. Furthermore, the system stays in State 1 with a transition probability of 36.8% and in State 2 with a transition probability of 55.9%. Therefore, this paper commends that the government of Ethiopia should follow a consolidated fiscal policy that broadens revenue sources for the public sector, tightens the fiscal gap, and ensures fiscal sustainability with low regime deficit financing and a reasonable level of inflation.
The Impact of Financial Inclusion on Bank Performance in Ethiopia: Panel Data Analysis
(A.A.U, 2024-06-18) Alie Fentaw; Jemberu Lulie (PhD)
This study examines the relationship between financial inclusion and banking performance in Ethiopia, using data of 10 banks from 2012 to 2022. The study employs the panel data model to assess the impact of financial inclusion on bank performance. The Regression analysis was conducted after carrying out the Housman test to determine the suitability of either the fixed effect or random effect model after developing the bank performance index and financial inclusion index using principal component analysis (PCA). The results show that financial inclusion negatively affects bank performance and profitability, as measured by the bank performance index. The research has shown bank-specific factors, such as net loan-to-asset ratio, are insignificant to banking performance. Additionally, the deposit has a positive significance for banking performance in the study of selected ten banks in Ethiopia. Inflation and GDP growth rate significantly impact banking performance. The emphasis on increasing the availability of financial services underscores the importance of establishing a robust infrastructure that can cater to the diverse needs of customers across various regions. By expanding physical branches, developing digital banking solutions, and implementing innovative delivery channels, banks can ensure that their services are easily accessible to a wider audience. Finally, the authors suggest the crucial need for banks to collectively prioritize accessibility, utilization, and availability to boost not only their profitability but also their essential role in catalyzing sustainable economic growth and cultivating a more inclusive financial landscape in Ethiopia. This strategic alignment between financial institutions and economic development goals signifies a pivotal stride towards strengthening the nation's economic foundation as a whole. Key Words: Financial Inclusion, bank performance, return on asset, return on equity, net interest margin, principal component analysis (PCA), Gross Domestic Product (GDP)
The Effects of Financial Development and Trade Openness on Economic Growth: Evidence from Sub-Saharan African Countries.
(A.A.U, 2024-06-30) Alemu Olani Tesgera; Fantu Guta (PhD)
For a panel of 21 SSA nations, this study looks at the impacts of financial development and trade openness on economic growth from 2005 to 2018 using balanced data and there is no data for some countries between 2019 and 2022 on some variables. Opposite to most existing studies, the analysis makes use of random effect model that is more efficient as it captures both the within and the between variation of the data and heterogeneity across countries. The panel analysis's findings forwarded that economic growth benefits from trade openness and financial development and the presence of long-term relationships is demonstrated using cointegration test. Unemployment, FDI and inflation are used as control variables. Unemployment and inflation have showed the negative relationship with economic growth which is in accordance with the existing economic theory whereas strong justification has presented for the negative relationship between FDI and economic growth. The results also show that expanding domestic loans to the private sector and the number of commercial bank branches are important channels via which financial development supports economic expansion. Granger causality tests demonstrate the causal relationship between economic growth and trade openness and between economic growth and financial development. The results have showed important policy ramifications for trade openness, financial development, and economic expansion in SSA nations.
Effects of Economic Policy Uncertainty on Credit Risks and Banks’ Lending Decisions: Evidence from Ethiopian Commercial Banks
(A.A.U, 2023-07-04) Fanuel Gizaw; Befekadu Degife(PhD)
The objective of this study is to explore the effects of economic policy uncertainty on credit risk and lending decision of 12 Ethiopian commercial banks for the period spanning from 2010– 2021. In order to analyze the relationship between credit risk measured by non performing loan ratio and lending decisions measured by growth rate of loan and economic policy uncertainty controlled bank specific and macroeconomics variables, the study employed two fixed effect (within) panel regression Models. The empirical results revealed that economic policy uncertainty has a significant positive effect on credit risk (nonperforming loan ratio), and a significant negative effect on lending decisions (growth rate of loan). Furthermore, bank size and gross domestic product have significant negative relation with non performing loans and have significant positive relationship with growth rate of loans. However, lending interest rate has a significant positive relationship with nonperforming loan and has a significant negative link with lending decision of Ethiopian commercial banks.
Credit Risk and Technical Efficiency in Ethiopian Commercial Banks
(A.A.U, 2022-06-22) Tamrat Mekonen; Guta Legesse (PhD)
This study examined the relationship between credit risk and technical efficiency of Ethiopian commercial banks in the period from 2012/13 to 2017/18. The two-stage data envelopment analysis model was used to obtain efficiency scores. The estimated result of the constant returns to scale assumption indicates that the commercial bank of Ethiopia and Dashen bank are inefficient, whereas Debub Global bank, Addis International bank, and Zemen bank are more than efficient compared to the other. Similarly, the estimated result of variable return to scale assumption showed that Commercial bank of Ethiopia and Dashen bank are shown to be inefficient, whereas Addis International bank, Development bank of Ethiopia and Debub Global bank are found to be more efficient. It is also found that, in compared to the commercial banks included in the study, united bank and Debub global bank are the most scale efficient commercial banks in Ethiopia, whereas Bunna international bank and Ethiopian Development Bank are the least scale efficient banks. In the second stage to estimate the relationship between credit risk and technical efficiency score of commercial banks as we used Tobit model. The finding indicates that credit risk has negative and statistical significant effect on Ethiopian commercial bank’s technical efficiency. The higher the credit risk is the lower the efficiency scores and those commercial banks that manage to maintain their continuity in the market and diversify their products had higher efficiency scores, however generating greater benefits to their shareholder. Furthermore, the findings also indicate that liquidity risk, return on asset and capitalization have positive and significant effects on the technical efficiency score of the commercial banks under study, whereas ownership structure have negative and significant effects, but market share is a positive and insignificant variable under this study.
The Effect of Foreign Direct Investment on Economic Growth in Sub-Saharan Africa: Moderation Analysis
(A.A.U, 2024-06-17) Tegegn Tise; Mengesha Yayo (PhD)
Considering the empirical and literature gaps as well as ongoing debates and dilemmas about the effect of Foreign Direct Investment (FDI) on economic growth in sub Saharan African countries, the objective of this study is to examine the effect of foreign direct investment (FDI) on economic growth in sub-Saharan African countries and the moderating roles of macroeconomic stability, infrastructure development, and trade openness on this relationship. Using panel data for 18 sub-Saharan African countries from 2000 to 2022, the study employs System GMM (Generalized Method of Moments) and structural equation modeling techniques to analyze the dynamic relationships. The findings indicate that Foreign Direct Investment has a positive and significant effect on economic growth in the region. However, the effectiveness of FDI in promoting growth is found to be contingent on the prevailing macroeconomic conditions, level of infrastructure development, and degree of trade openness. Specifically, the results show that macroeconomic stability and infrastructure development positively moderate the FDI-growth nexus, enhancing the growth-inducing impact of FDI. Conversely, trade openness is found to negatively moderate this relationship, suggesting that excessive trade liberalization may limit the growth benefits of FDI inflows. These findings underscore the importance of establishing conducive macroeconomic environment, investing in infrastructure, and carefully managing trade policies to maximize the growth-enhancing effects of foreign direct investment in sub-Saharan Africa. The study provides valuable policy implications for governments and policymakers in the region aimed at leveraging FDI to foster sustainable economic development. Key Words: Foreign Direct Investment (FDI), Economic Growth, Sub-Saharan Africa, Macroeconomic Stability Infrastructure Development, Trade Openness
Factors Affecting the Profitability of Private Commercial Banks in Ethiopia: A Panel Data Analysis (2012-2023)
(A.A.U, 2024-06-15) Wuletaw Adamu; Atnafu GebremeskeL (PhD)
The primary aim of this study is to examine the factors that affect private commercial banks profitability in Ethiopia between 2012 and 2023. The National Bank of Ethiopia and the yearly audited financial reports of 13 particular private commercial banks were consulted by the researcher in order to accomplish this goal. We examined the factors affecting private commercial banks profitability using descriptive analysis, correlation analysis and Random effect panel data regression analysis. Return on assets (ROA) was used as the proxy for profitability and the dependent variable. The findings of this study conclude that bank size, non-interest income, market share, and GDP growth rate had a positive and significant effect on the profitability of private banks in Ethiopia. In contrast, credit risk and operational cost efficiency ratio negatively and significantly impacted profitability. The study also found that loan deposit ratio, capital adequacy, and inflation had an insignificant effect on the profitability of private banks. The major findings of the study show that bank size, credit risk, operational cost efficiency, non-interest income, and market share are very important in explaining profitability with a highly significant value. Therefore, due attention should be given to ensuring factors specific to banks and the industry for the better performance and profitability of private commercial banks in Ethiopia. Key Words: private commercial banks of Ethiopia, profitability, Random Effect panel model
The Determinants of Banking System Stability in Ethiopia: A Panel Regression Analysis
(A.A.U, 2024-06-15) Yitayal Demissie; Gebeyehu Manie (PhD)
Research on the factors influencing stability of banks has shown that both external and bank-specific factors have impacts on banks’ financial stability. Nevertheless, the majority of the studies were carried out in industrialized countries, where banks typically have greater wealth and greater fluidity than banks in developing countries have. This thesis investigates the determinants of banks system stability in Ethiopia through a panel regression analysis encompassing 16 commercial banks for the time period 2015 to 2023. The thesis employed the Generalized Method of Moments (GMM) regression technique to address endogeneity concerns, specifically unobserved heterogeneity. The results show that prior year's banks stability positively affects the current year's stability, suggesting persistence in banks performance. Equity-to-asset ratio (ETA) shows a negative impact on banks stability, indicating that higher efficiency values from previous periods may lead to current volatility. Return on equity (ROE) demonstrates an inverse relationship with banks stability, suggesting that historically high profitability may lead to future instability. Additionally, increased mobilized share capital and economic growth positively correlate with banks stability, indicating that higher capital buffers and favorable economic conditions enhance financial stability. These findings provide valuable insights for policymakers and bank management. Keywords: Bank Stability, GMM, Z-Score, Ethiopia
Trade Effect of Chinese Belt and Road Initiative: Evidence from Sub-Saharan African Countries
(A.A.U, 2024-07-23) Degu Zinabe Fentaw; Mengesha Yayo (PhD)
Trade Effect of Chinese Belt and Road Initiative: Evidence from Sub-Saharan African countries Degu Zinabe Fentaw Addis Ababa University, 2024 Chinese Belt and Road Initiative (BRI) is the most recent and inclusive initiative launched in 2013 with the goals of policy coordination, facilities connectivity, unimpeded trade, financial integration and people to people interaction between China and member countries. Since BRI would bring improvement in the infrastructure gap, its contribution in deceasing cost of trade was expected very significant. But its real impact on the case of Sub-Saharan Africa region wasn’t well indicated by other empirical studies. The main objective of the current study was to examine the trade effect of BRI on Sub-Saharan Africa region. This study employed a panel data set from 2018-2022 involving 26 reporting and 22 partner sampled countries. It used augmented gravity model with PPML estimation technique. According to the findings of this study, BRI has a positive contribution in trade; it resulted in up to 7.1% trade creation effect for Sub-Saharan Africa region. GDP of reporting countries, GDP per capita of both reporting and partner countries, bilateral exchange rate, land locked, common border, common colonizer and having common official language were significantly associated variables with the bilateral trade. BRI improves trade performance of Sub-Saharan Africa region. But it is strongly recommended that policy harmonization, addressing production bottlenecks particularly in the manufacturing sector, measurements in knowledge transfer should be emphasized to optimize the contribution of BRI.
Factors Affecting Credit Risk on Ethiopian Commercial Banks: Dynamic Panel Data Models
(A.A.U, 2024-06-08) Gashaye Keskis; Tefere Daba (PhD)
Low follow up after disbursement of the loans and weakness of identifying key costumers which were arise bank- specific factors by bank’s risk management team. Also, financial or economic crises may make the banking sector exposed to high credit risks, which may lead to high levels of default. Furthermore, the high level of debt burden ratio may make customers unable to pay their financial obligations, thus increasing credit risks. The current study is in line with this and aims to examine the determinants of the nonperforming loans (NPLs) in Ethiopian banking sector. To that effect, we consider internal factors that include bank-specific variables, and external factors that involve bank-specific and macroeconomic variables. We estimate a dynamic panel data model by the system Generalized Method of Moments (GMM) for a set of 13 Ethiopian commercial banks based on annual data covering the period from 2010 to 2022. The finding revealed that for which the importance of bank-specific factors in explaining the NPLs ratio. In actual terms, there were significant and positive linkages between the one-period lagged NPLs ratio, cost efficiency ratio return on equity (bank performance) and the capital adequacy ratio on the one hand, and the NPLs ratio on the other hand, and significant and negative linkages between the bank size, loan growth rate, loan deposit ratio and the NPLs ratio.The study provides important recommendations for bank decision makers in the Ethiopian commercial banks. Indeed, they should work on improving the operational efficiency and enhancing credit risk management and risk management in the banking sector, developing the operational framework for the monetary policy of central banks, enhancing the opportunities to benefit from the credit information industry, boosting the government's role in adopting economic policies that support investment, developing stress tests for banks, and adopting early warning systems.
Essays on Firm-Level Industry Policy Incentives and Capability Building in the Context of Developing Countries
(A.A.U, 2024-05-27) Moges Tufa; Måns Söderbom(Prof)
This study evaluates the impact of a sector-specific industrial policy program on the performance of Ethiopian chemical manufacturing firms using a quasi-experimental design The data for the study come from firm-level field surveys and administrative sources. To account for heterogeneity and selection bias due to observable and unobservable factors, we employ a range of empirical strategies, including Quantile Regression, Propensity Score Matching (PSM), Endogenous Switching Regression (ESR), and Generalized Propensity Score (GPS) models. We also used alternative estimation methods that fit our data and sample size. Our findings show that the program has a positive and significant effect on the productive capacity utilization of beneficiary firms, while there is no evidence of any impact on employment generation. The results show that the program’s beneficiary firms utilized an actual productive capacity of 4.5%-7.6% more than non-beneficiaries. We conclude that the program has mixed effects on the performance of domestic chemical manufacturing firms. This study contributes to the scant literature that provides empirical evidence that informs public policy decisions in the context of developing countries.
Perception of Workers on the Impact of Financial Technology on Bank Profitability: The Case of Commercial Bank of Ethiopia
(A.A.U, 2024-06-25) Yared Deneke; Girma Estiphanos (PhD)
One of the most important strategies banks employ to be profitable and competitive in the banking industry is financial innovation. Using the six financial technology dimensions, this study investigates how financial technology affects bank profitability based on the perceptions of employees at the Commercial Bank of Ethiopia. The impact of fintech on bank profitability was evaluated using the six fintech dimensions, namely ATM, mobile banking, online banking, POS, mobile wallet, and electronic fund transfer. To achieve the research objectives, the study used a descriptive and explanatory research design. To obtain a representative sample from the population, a purposive sampling technique was employed. Using a structured questionnaire, the required data was gathered from Commercial Bank of Ethiopia employees working in branches located in the city of Addis Ababa. A total of 350 out of the 395 questionnaires that were distributed to gather data were returned. Version 26 of the Statistical Package for the Social Sciences (SPSS) was used to process the data. Out of the six financial technologies, four have a positive beta (β) value, indicating a positive association and significant influence on bank profitability. In contrast, two predictors, ATM and POS, insignificantly affect bank profitability, with ATM also having a negative β coefficient, indicating a negative relationship with profitability. Internet banking is the best predictor among all explanatory variables, and it is important to fully utilize it to increase bank profitability.
Education and Economic Growth in Sub-Saharan African Countries: The Moderating Role of Education Expenditure
(A.A.U, 2024-09-03) Tsion Mekonen; Alemu Lambamo (PhD)
Even though education has been highlighted in several empirical literature, as a factor that could spur up economic growth, the level of education in sub-Saharan Africa is not effectively channeled into desired levels of economic growth. However, there is an indication in the literature that education will be more relevant to the economic growth of sub-Saharan African economies that maintain strong and effective education spending. This study investigates the relationship between education and economic growth, with a particular focus on the moderating role of education expenditure. Utilizing a dynamic panel data model, the analysis covers annual data from 41 sub-Saharan African countries between 2001 and 2022. Employing the system Generalized Method of Moments (GMM) estimation technique, the results indicate that education expenditure moderates the effect of education on economic growth in these economies. The study’s findings also shows that GDP per capita growth rate is positively correlated with primary education, secondary education, tertiary education, export, consumption and gross domestic saving while it is negatively correlated with labor force, gross fixed capital formation, education expenditure, import and inflation. The study concluded that education with the support of effective education spending will boost productivity and this resulted in increasing the level of economic growth. It is therefore recommended that sub-Saharan African economies should apply appropriate measures to boost their education spending so that gains from the education sector can effectively be channeled into economic growth.

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