Development Economics

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An Empirical analysis of the Effect of Money Supply and Economic Growth: Evidence From Sub-Saharan Africa
(Addis Ababa University, 2026-06-02) Tizita Assefa; Atnafu GebremeskeI
This study empirically examines the effects of money supply on economic growth in 12 Sub Saharan African countries over the period 1970-2023 using second-generation panel econometric techniques. The fixed Effects model (preferred by the Hausman test) reveals that money supply increases GDP by 0.022%. However, investment is the dominant driver of growth with an elasticity of 0.59155, which is approximately 27 times larger than money supply. The Westerlund cointegration test confirms a long-run equilibrium relationship, with the Pooled Mean Group (PMG) long-run estimation revealing a money supply elasticity of 0.02345 and an error correction speed of 31.2% per year. The Granger Causality test shows unidirectional causality from M2 to GDP, supporting the supply-leading hypothesis. Strong cross-sectional dependence exists for all variables, requiring regional monetary coordination. Substantial income group heterogeneity exists, with money supply elasticities varying from 0.089 (uppermiddle) to0.011 (low-income). Investment promotion should be the top priority (27 times more powerful than money supply). A one-size-fits-all monetary policy is inappropriate for heterogeneous SSA
Financing Ethiopia’s Future: Market-Driven Domestic Debt as A Growth Catalyst
(Addis Ababa University, 2025-06-02) Haile Meseret; . Alemu Lambamo
In this study, an attempt has been made to find out the influence of market-based domestic debt using the issuance of treasury bills on the economic growth in Ethiopia. In order to conduct the study on the effectiveness of treasury bills issuance on economic growth in the long and short run, this study adopted the Autoregressive Distributed Lag (ARDL) model using the annual time series data from 1993 to 2025. Data have been sourced from The National Bank of Ethiopia, World Bank, and Ministry of Finance. The result obtained in this study indicates that the use of treasury bills as a domestic financing tool has a positive and statistically significant impact on economic growth in the short run and a positive but statistically insignificant impact in the long run. The result aligns with the Ricardian equivalence theory. The government should manage its domestic debt, so that it can serve as an efficient instrument of short-term financing without crowding out private sector credit. In the long term, the development of government bonds should be promoted, where the capital is mainly directed to areas that can enhance sustainable economic growth
Essays on Digital Technologies, Entrepreneurship, and Economic Outcomes in SubSaharan Africa
(Addis Ababa Universtiy, 2026-06-01) Kebede Bekele; Gebeyehu Manie
Over the past few decades, internet access and the adoption of 3G/4G wireless networks have expanded across Africa. This digital transformation brings both opportunities and challenges. In this study, we use panel data from two rounds of the World Bank Enterprise Survey conducted in Zambiabefore and after the COVID19 outbreak to examine the impact of digitalization on firm resilience in a developing country context. Our analysis employs entropy balancing anddifferenceindifferences models and remains robust across various estimation techniques. A key finding is that firms that had adopted digital technologies before the pandemic experienced less revenue loss than other firms. The average effects are large but vary significantly across industries. These findings underscore the potential of digital strategies in mitigating economic disruptions.
The Impact of Cereal Commercialization on Household Food and Non-Food Expenditures Among Smallholder FarmersiIn Ethiopia.
(Addis Ababa University, 2025-09-01) Kenna Amsalu; Hailu Elias
This study examines the impact of cereal commercialization on the food and non-food expenditure of smallholder farmers in Ethiopia, which is measured by their food expenditure share. Contrary to the common assumption that higher sales volumes indicate welfare, this research measures the economic well-being of households by comparing the share of food expenditure and non-food expenditure from their budget to measure the impact of commercialization on their financial status. Endogenous switching regression and counterfactual analysis to understand the average treatment effect on the treated and the untreated are used to analyze the relationship between commercialization and household budgets. This study draws on data from a larger survey to provide an understanding of this relationship. The results indicate commercialization has generally a desirable impact on households improving their status. On average commercialized cereal farmers are found to have a lower food expenditure share compared to semi-commercialized and subsistent farmers but there are heterogeneity effects that make some farmers better off than others and affect food expenditure shares. The net effect of commercialization differs among households. Among the control variables, larger household sizes, household heads' literacy, crop rotation agrochemical use, and participation in the AGP program are associated with a decrease in the food expenditure share of households’ budgets. Agricultural policies should be targeted at promoting cereal commercialization among smallholders while building the capacity of smallholders to withstand the economic losses they incur while adopting agricultural technologies that will improve their livelihood
Determinants, intensity, and Effects of Postharvest Losses of Maize on Food Security in Ethiopia
(Addis Ababa University, 2026-06-01) Henok Taye; Hailu Elias
Reducing postharvest losses of maize crops is crucial for minimizing food shortages, securing food, and nutrition stability in Ethiopia. Nonetheless, little is known about the factors influencing the occurrence and extent of postharvest maize losses and their impact on food security. This research employs data from three rounds of the Resilience to Climate Change (RCC) survey in Ethiopia to examine the main factors affecting postharvest losses among smallholder maize farmers and their impact on food security. The panel double-hurdle model was used to analyze factors influencing the probability and extent of postharvest loss, and a panel probit model was employed to assess the impact of postharvest loss and other variables on food security. The findings of the double hurdle model revealed that literacy status and maize production volume are associated with a reduced likelihood of encountering postharvest losses. The volume of maize production, landholdings, livestock ownership, irrigation practices, and utilization of agrochemicals were associated with decreased post-harvest losses. The probit model estimates indicate that higher postharvest losses of maize reduce the probability that the household is secured. The findings also revealed that literacy status, maize production, land holding, livestock ownership, irrigation, and agrochemicals were the determinants that affect both postharvest losses and food security. The study findings underscore several actionable recommendations for the government to build post-harvest intervention systems employing these variables, which are key determinants of post-harvest losses and food security. Consequently, addressing the higher post-harvest losses of maize and food insecurity in the study region necessitates targeted policy interventions that enhance maize production, invest in education, improve the physical and natural capital endowments of households, and promote the adoption of agricultural technology and inputs to mitigate post-harvest losses and food insecurity among smallholder maize farmers in the country
The Effect of Generation Inclusive HR Practice on Employee Commitment & Turnover Intention: the Case of Dashen Bank and Bank of Abyssinia
(A.A.U, 2026-01-01) Natnael Girma; TilahunTeklu
This research investigates the effect of generation inclusive Human Resource practices on employee commitment and turnover intention in Dashen Bank and Bank of Abyssinia. As workforce demography is shifting to more diverse one, the conventional general HR management approaches will not address the unique needs and expectations of diverse groups (Boehm et al., 2021, p. 1). This study adopted an empirical quantitative research approach, based on primary data gathered from 208 respondents through administered questionnaire. A number of hypothesized relationships were developed and tested using T-test, ANOVA,Regression, and Mediation analyses with SPSS, version 22. The research findings indicate that organizations that implement generation inclusive HR practice tend to have employees with high commitment and lower turnover intention. The study also showed that employee commitment was found to mediate the relationship between generation inclusive HR practice and turnover intention. Furthermore, the study also revealed statistically significant differences in mean employee commitment scores, at a 1% level of significance, between generation Z and millennial generation employees. Findings from this research study makes important contribution to the theoretical understanding of generation inclusive HR practices and provide empirically validated practical recommendations for HR practitioners on how to foster employee commitment and retention through implementing generational inclusive human resource practices. Moreover, this study is also expected to fill knowledge gap specifically with in Dashen Bank, and Bank of Abyssinia. Keywords: generation inclusive HR practice, employee commitment, turnover intention
Essays on Firm Behavior and Performance in Ethiopian Manufacturing: Labor Demand, Capital Accumulation, and International Linkages
(A.A.U, 2025-09-22) Eyayu Tesfaye; Mans Soderbom
First and foremost, I am deeply grateful to the Almighty God for granting me the strength, health,and perseverance to undertake and complete this PhD journey. I am sincerely indebted to my principal advisor, Prof. Måns Söderbom, for his invaluable guidance, constructive feedback, and continuous encouragement throughout every stage of this research. His scholarly rigor and intellectual generosity have been a constant source of inspiration. I also extend my heartfelt thanks to my co-advisor, Dr. Atnafu Gebremeskel, for his insightful comments, support, and contributions that greatly enriched the quality of this dissertation. I am grateful to the Department of Economics at Addis Ababa University, the Environment for Development (EfD) initiative, and the University of Gothenburg for providing a stimulating academic environment, access to resources, and institutional support. I also thank the Swedish International Development Agency (SIDA) for the generous financial support that made this research possible. My appreciation extends to the staff of the Ethiopian Statistical Services (ESS), Dr. Tadele Ferede, and Dr. Tsegay Gebrekidan for facilitating access to the firm-level datasets used in this study. I would also like to thank International Growth Center (IGC) for the PhD fellowship opportunity. I am grateful to Adrian Poignant, Postdoc researcher at University of Gothenburg for his constructive comments. Special thanks to my fellow PhD colleagues, friends, and faculty members for their encouragement and moral support. Finally, I dedicate my deepest gratitude to my family, especially my wife, Dr. Asresie Tesfaw, and my children, Eyoas and Zemichael, for their unconditional love, patience, and unwavering belief in me. Your sacrifices and support sustained me through the most challenging times. To all who contributed to this work, directly or indirectly, I offer my sincere thanks.
The Nexus between Banks Soundness and Performance: Evidence from Selected Commercial Banks in Ethiopia
(AAU, 2025-06-02) Naji Kasim; Kefyalew Endale
The stability and performance of commercial banks are vital for Ethiopia’s economic development, particularly in a volatile financial landscape. This study explores the relationship between bank soundness and financial performance within Ethiopia’s commercial banking sector, analyzing 16 banks from 2015 to 2024. Using the CAMEL framework Capital Adequacy, Asset Quality, Management Efficiency, Earnings, and Liquidity; it evaluates their impact on key profitability metrics: Return on Assets, Return on Equity, and Net Interest Margin. The analysis incorporates institutional factors such as bank age, ownership structure, and bank size, alongside macroeconomic variables like real GDP growth, to ensure a comprehensive assessment. A quantitative panel data approach with a Random Effects model is employed, addressing econometric challenges through diagnostic tests to ensure robustness. The findings highlight a significant relationship between soundness indicators and financial performance metrics, revealing that operational efficiency and scale are critical drivers of profitability. Larger banks show stronger interest margins, underscoring the benefits of scale in Ethiopia’s banking landscape. While Capital Adequacy exhibits a generally positive but inconsistent influence on performance, liquidity supports interest income generation. Macroeconomic factors and ownership structure show limited impact, emphasizing the role of internal factors in navigating Ethiopia’s economic environment. These insights provide valuable guidance for policymakers and bank management. Keywords: Bank Soundness, CAMEL Framework, Random Effects Model, Ethiopian Commercial
Transmission Mechanism of Trade Liberalization Policy on Economic Growth in Ethiopia: Svar Approach
(AAU, 2025-06-01) Shiferaw Gonfa; Girma Estiphanos
This study aimed to investigate the transmission mechanism of trade liberalization policy on economic growth in Ethiopia by using Structural Vector Autoregression (SVAR) approach with annual data from 1991 to 2024. The study identifies both direct and indirect channels through which trade liberalization policy effect real GDP via foreign direct investment (FDI), inflation, and exports. The results from impulse response function (IRF), structural coefficient matrices, and forecast error variance decomposition (FEVD) provide robust empirical understandings. The finding of the study reveal strong direct effect with tariff rate shocks explaining approximately 19.1% of real GDP. Among indirect channels, tariff rate induced increases in FDI accounts for 0.85% of real GDP growth variance. In inflation channel, declines following tariff reductions contribute 3.5% to real GDP growth. The export channel remains weak, contributing less than 2% to growth, limited by structural constraints in Ethiopian trade sector. These results underscore that trade liberalization affects economic growth both in short and long run, immediate effects through increased FDI inflows and reduced inflation and over the long run evidenced by IRF and FEVD results that shows positive and sustained increase in real GDP growth. Keywords: Trade Liberalization policy, Economic Growth, SVAR, Ethiopia, Transmission Channels, Tariff Rate, FDI, Inflation, Exports
Factors affecting customer retention in the Ethiopian Banking Sector (Study on Commercial Bank of Ethiopia customers in Addis Ababa)
(A.A.U, 2025-12-01) Aregaw Tadele; Abera Legesse
This study looked at how customer experience and quality service affect customer retention in the Ethiopian banking sector. It focused on the mediating roles of customer satisfaction, trust, customer loyalty, and corporate image. The study aimed to address ongoing challenges in customer retention that banks face, even with service improvements and growing competition. A quantitative, explanatory research design was used with a cross-sectional survey approach.Researchers collected data from 389 bank customers through structured questionnaires, using simple random sampling. They analyzed the data with descriptive statistics, correlation analysis,and multiple regression techniques. They performed mediation analysis following the Baron and Kenny method, along with Sobel tests to check the significance of indirect effects. The findings revealed that customer experience and quality service has a significant and positive effect on customer retention. Furthermore, customer satisfaction, trust, customer loyalty, and corporate image were found to significantly mediate the relationship between customer experience and customer retention, indicating both partial and full mediation effects across the proposed pathways. These results highlight the importance of managing not only service delivery but also relational and perceptual factors to enhance long-term customer relationships. The study adds to the existing literature by expanding customer experience and relationship marketing theories through a detailed mediation framework in the Ethiopian banking context. It offers practical insights for bank managers and policymakers, highlighting the need for overall customer experience strategies and quality service to boost customer retention and maintain a competitive edge. The study also suggests future research directions, especially in using longitudinal designs and comparing different sectors. Keywords: Customer Experience, Quality service, Customer Retention, Customer Satisfaction, Trust, Customer Loyalty, Corporate Image, Ethiopian Banking Sector
The Effect of Talent Management Practices on Organizational Performance: In the case of Commercial Bank of Ethiopia
(A.A.U, 2026-01-01) Eleni Ayalneh; Asres Abitie
Today the concept talent management has attracted most business companies around the world because human capital is critical element of competitive advantage. Talent management is a science used to improve business value and achieve organizational performance by implementing talent management practices this helps organizations to achieve their goals. The purpose of this study was to examine the effect of talent management practices on organizational performance in Commercial Bank of Ethiopia. In this study an explanatory and descriptive research design and qualitative and quantitative research approaches were used to meet the specific objective of the study and to answer research questions. The population of this study were employees of Commercial Bank of Ethiopia head office. Primary data gather from 384 responses obtained through questionnaires. The data was analyzed by using descriptive and inferential tools with the help of statistical package for social science (SPSS) Version 27. The result of descriptive analysis describe that the mean score for overall talent management practice components- talent attraction, talent development and talent retention is above the average. The correlation analysis result showed that there is a major positive strong relationship exists between talent management practices and organizational performance. In addition to this the regression analysis evidenced that talent management practice is predictor of organizational performance. The study suggested that an attention should be given by the organization on all components talent management practices to improve organizational performance. Finally, based on the research findings, conclusion, appropriate recommendations and suggestion for future research direction were presents in the study. Key Words-Talent Management, Talent Attraction, Talent Development, Talent Retention and Organizational performance.
Essays on Development and Behavioral Economics: Examining the Interplay Between Shocks, Social Capital, Trust, and Prosocial Attitudes
(A.A.U, 2025-11-03) Abraham Seyoum; Peter Martinsson; Jonse Bane
The literature is unclear whether social capital can insure effectively against shocks. We provide evidence from rural Ethiopia, a setting characterized by prevalent shocks, lack of formal insurance markets, and functioning informal traditional institutions, using four waves of household panel surveys with over 6000 observations. We measure social capital as the social network - based resources available to rural households via local informal institutions, alternatively measured as network size, network diversity, and simple membership in institutions. Fixed effect estimation results show that the buffering role of social capital extends beyond insurance against idiosyncratic shocks, with variation across welfare and social capital measures. Social capital helps protect against multiple and simultaneous shocks, buffering shortfalls in not only total consumption but also food and consumables consumption. Rural households thus benefit from informal insurance in local institutions in the absence of formal insurance markets. Rural insurance policies and efforts to address food insecurity and rural development challenges should consider resources embedded in these institutions. Keywords: Social capital, social network, Local informal institution, informal insurance, shock
Effect of E-Banking Service Quality on Customer Satisfaction: The Case of Nib International Bank S.C. In Addis Ababa
(A.A.U, 2026-02-01) Eyerusalem Melese; Abera Legesse
The primary objective of the study was to examine the effect of E-banking service quality on customer satisfaction at NIB International Bank S.C. in Addis Ababa. This research is highly relevant to stakeholders in the banking and financial services sector, as it offers practical insights into leveraging E-banking innovations to enhance customer satisfaction and maintain a competitive edge in a rapidly digitizing financial environment. A quantitative research approach with an explanatory research design was employed and data were collected from 390 E-banking user using structure questionnaires aligned with the study objectives and relevant literature. Statistical tools like explanatory correlation techniques and multiple regression analysis were used in data analysis. The finding indicated that all e-banking service dimensions recorded mean scores above the midpoint indicating generally positive customer perceptions. Customer satisfaction was positively and significantly impacted by responsiveness customer support security innovation and user interface according to correlation and regression analyses however ease of use despite its high rating did not have a statistically significant impact. The strength of the identified predictors was highlighted by the regression model which accounts for 72.8% of variance in customer satisfaction. The study concluded that while NIB International Bank had made significant strides in implementing digital banking channels more advancement in customer service, user interface design, IT infrastructure customer support mechanism, platforms efficiency, and cyber security measures were essential to enhance overall customer satisfaction
Factors Affecting Adoption of Mobile Banking: A Case Study on The Commercial Bank of Ethiopia
(A.A.U, 2026-02-01) Matiyas Worku; Yared Asrat; Tilahum
This study was conducted to understand and analyze the foctors influencing the adoption of M banking with CBE as the case study and in the context of Addis Ababa, at selected branches of the bank. It was conducted by employing the Technology-Organization-Environment (TOE) framework, which mainly focus on examining determinants of M-banking adoption at firm level.A total of 139 valid responses were collected out of 155 questionnaires distributed to the randomly selected digital banking staffs of CBE at selected branches of Addis Ababa. The questionnaire’s reliability was confirmed with a Cronbach’s Alpha value of 0.90. This study adopted quantitative research approach and it is based on closed end questionnaires with 5-point Likert-scale. Multi stage sampling was employed to select respondents for this study. The collected data from respondents was analyzed using SPSS software version 23. A descriptive and regression analysis method was employed to analyze the collected data. In addition, interview was conducted on key informants to reinforce the quantitative findings. A secondary data was reviewed from several publications to support the findings of this study. The result of the regression analysis shows that the most significant influence on M-banking adoption arises from the technological factors of the TOE framework. But organizational and environmental factors were found to have no statistical significance in the multiple regression, this is likely due to the shared variance which is observed in the correlation analysis among the independent variables. Overall, the regression model was able to explain 30.6% of the variance in m-banking adoption were organizational and environmental factors were found to be statistically insignificant likely due to the shared influence and suppression effects among the explanatory variables. The interview responses from key informants indicates that external barriers such as unstable national internet connectivity, internal challenges like frequent service interruptions, customers' need for physical receipts, and strong concerns about fraud and social-engineering were the main challenges that hindered the adoption of M-banking adoption at CBE. Keywords: M-banking, adoption, TOE, CBE, technology, organization, environment
Effects of Political Instability on Commercial Bank’s Performance in the Case of Selected Sub-Saharanafrica countries
(A.A.U, 2025-01-20) Getachew Molla; Abdurezack Hussein
This paper evaluates the effects of political instability on commericial bank performance in case of selected sub-saharan African countries for the period 2016-2023. In order to test the proposed relationship a sample of under listed top three banks at the each countries was utilized. The study employed secondary data collected from annual audited financial report for each banks and world bank. In addition, macro economic variables including political instability indicators was gathered through world development indicators databases. The study was used fixed effect panel model to accomplish the proposed objectives. Diagnostic tests such as heteroskedasticity, cross sectional independence, serial correlation and multicollinearity test was performed before employing FE model. The result of fixed effect model indicate that ROA is significantly and negatively affected by political instability during the period of study, this mean there is a posetive relationship between political stability and bank performance. Internal determinants of commercial banks are very crucial and singnificant. Loan to deposit volume, bank’s size, and deposit volume, have a positive and significant impact on bank’s performance, where as non-performing loan have a negative and significant effect on bank performance. However, macroeconomic variable are insignificant. The study contributes knowledge in the field of political instability and bank profitablity for sub-Saharan African countries and all africa. As a result, this paper will provide a significant enhancement to the theoretical literature, the industry,and policymakers.
The Effect of Financial Inclusion on Inflation: The Case of Ethiopia
(A.A.U, 2024-07-02) Gebe Yemataw Gzaw; Jemberu Lulie
Currently,financial inclusion is receiving significant attention in policy circles due to its role in fostering national development and managing inflation through effectivemonetary policy transmission in the economy. This study focuses on analyzing how financial inclusion impact inflation levels in Ethiopia. Both long and short-run error correction time series model were estimated in the datasets spanning from 2010Q3 to 2023Q2. The results indicated that an increased in financial inclusion throughits measurements i.e. number of financial access points, per 100,000 persons and utilization of savings account per 1000 adults, led to a reduction in inflation by encouraging individuals to use formal financial systems by promoting efficient monetary transmission channel in the entire economy. Additionally, variables exchange rate and money supply demonstrated a positive impact on inflation levels. To effectively manage inflation, predict price movements in the economy, and make informed decisions, financial policymakers should prioritize expanding financial inclusion by increasing access points and offering suitable and affordable financial products and services specifically targeting the excluded and underserved segments of society. Monitoring broad money and exchange rates are also crucial, as they have significant effects on prices.
Analyzing the Impacts of Petroleum Consumption on Economic Growth in Ethiopia
(AAU, 2025-01-20) Alemnew Amslau; Tewodros Negash
Ethiopia, like any other emerging countries, has demonstrated poor economic performance. Although the fact that the country's current economic performance is highly remarkable, there are a number of challenges to sustain the present trend of economic growth. The main challenge is the availability and scarcity of energy sources. Energy is a driving force of development and plays a significant role in the country’s economic growth and prosperity. Ethiopia's economy is heavily dependent on imported petroleum products. Petroleum is one of the most important commodities in social, political and economic challenges. The main objective of the study was to examine the impacts of petroleum consumption on economic growth. Specifically, it determined the short and long run relationship between petroleum consumption and economic growth. It also examined the impacts of petroleum price on economic growth, to analyzing and showing the trends of petroleum consumption and economic growth over the study period. It modified a growth model with GDP as the dependent variable and labour force, domestic capital investment and petroleum consumption and unit price of petroleum products as the independent variables to be estimated. An exploratory research design was used and research work followed a quanitative approach by using secondary source of data was used to collect information and Error Correction model was used to estimate.First, the study determined the stationarity of the variables by using ADF and phillips-perron test and its result shows that all the variables are non-stationary at levels but stationary at first difference. The Cointegration tests result indicated that the null hypothesis of no-cointegration was rejected at 5% level of significance. The estimation results of the long-run relationship revealed that the relationship between PC,AUPP and DCI with GDP was negative and statistically significant but LF was positive and not statistically significant. The estimated methods of the error-correction model shows that in the short run there was a positive and statistical insignificance impacts of lagged petroleum consumption on real GDP. The Granger causality test result shows there was unidirectional causal relationship between petroleum consumption to GDP. Finally the result concluded that petroleum consumption has negative impacts on economic growth and the country is recommended that to derives or formulate policy implications from the results obtained regarding the implementations of the upstream projects of the petroleum and gas industry and to develop in alternative energy sources as substitutes of petroleum products
Macroeconomic, Institutional and political Determinants of Foreign aid Inflows: Evidence from selected sub-Saharan African Countries
(A.AU., 2023-06-01) Yimer Ali Mekonnen; Abdurezack Hussien
Using Blundell and Bond's one-step system GMM after controlling economic variables, this study evaluated the macroeconomic, political, and institutional determinants of the flows of official development in 40 SSA nations for the period 2002-2021. In order to reduce the possibility of multicolinearity and raise the weight of the variables, it calculated a weighted index using principal component analysis from the six governance indicators to quantify political stability and institutional excellence. The study's findings showed that institutional quality, the consumer price index, and lagged value government development assistance have a favorable influence on the flow of aid by 1% level of significant. The flow of government development assistance into SSA nations is also restricted by political stability, GDP per capita, and trade volume by 5%, 1%, and 1% level of significance. The study's policy recommendation is that governments in SSA nations can attract foreign capital by enhancing institutional quality and their ability to increase political stability and citizens' per capita income.
Foreign Direct Investment and Uncertainty: Evidence from Sub-saharan Africa
(A.A.U, 2021-06) Tarekegn Getasew; Boka Jonse Bane
This paper examines how macroeconomic, political, and property rights uncertainties in affecting FDI inflows into sub-Saharan Africa (SSA). The study applies both fixed effect and Arellano-Bond GMM dynamic panel data models for a sample of 26 sub-Saharan Africa countries over the period from 2000 to 2018. The study conducts model diagnostic and stationarity tests to ensure that estimation results are reliable. The findings of the study show that macroeconomic uncertainty as proxied by inflation and exchange rates are negatively related to the inflows of FDI to SSA. Our results also show that property rights uncertainty as proxied by rule of law has a positive effect on FDI inflows while, investment profile has negative effect on FDI inflows to SSA. Similarly, the overall measure of political uncertainty is negatively associated with FDI inflows to SSA. However, internal and external conflict, corruption, and bureaucratic quality have no significant effect on FDI inflows to SSA. Other variables included in the model, such as trade openness, rate of return on capital, and infrastructure, have a positive impact on FDI inflows. The policy implications of the study are that governments in SSA could attract more FDI by minimizing political risks, improving property rights enforcement, and managing key macroeconomic variables like inflation and exchange rate.
The Impact of Pesticides on Maize Production in Southern Ethiopia
(A.A.U, 2021-06) Yaynie Yordanos; Araya Mesele
Maize production is an important economic activity among smallholder farmers in southern Ethiopia, serving as a major source of income and food security. Maize farmers often use pesticides to control pests, but it poses environmental and human health risks. While the productivity of pesticides has been previously studied, most studies treated pesticide as a direct yield enhancing input rather that a damage reducing one. In this study, we analyze the productivity impact of pesticides using a damage control production function. We estimated Cobb-Douglas production functions using Nonlinear Least Square (NLS) and Two Stage Nonlinear Least Square (2SNLS) methods. We use panel datasets collected in 2018 and 2020 in the southern Ethiopia by the Social Sciences and Impact Assessment Unit of the International Centre of Insect Physiology and Ecology (icipe). The results of the NLS regression indicated that pesticides have no significant effect on maize yield. However, when we use the 2SNLS to control for endogeneity of pesticides, the coefficient of pesticides remains positive and statistically significant, indicating that it increases maize yield. The first stage estimated results of the 2SNLS indicates that pesticide use is affected by pesticide prices, contact with extension agents, application of organic fertilizers and the socio-economic characteristics of households. Furthermore, the marginal product of 1 liter of pesticide is found to be 51 kg of maize yield, which indicates that pesticides reduce yield losses due to pests. Calculations of optimal amount of pesticides show that farmers could maximize their profit at an average of 8.4 liters of pesticides. An average quantity above or below this value indicates an overuse or underuse of pesticides. However, this estimate is from the private profit maximizing point of view, but it is important to consider the health and environmental effects of pesticides. To fully understand the societal cost of pesticides, future studies may need to collect data on not only the private benefits, but also the potential costs associated with public health and the environment.

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