Economic Growth, Capital Accumulation and Stability in Ethiopia.
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Date
2008-07
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Publisher
A.A.U
Abstract
This study tries to investigate the impact of capital accumulation
and macro stability on economic growth of Ethiopia taking a series
of data range from 1971 to 2006. result of co-integration test using
Johanson likelihood approach indicates that all explanatory
variables which are entered in the model form long-run
equilibrium. the study is also conducted test for weak exogeneity and
test for zero restrictions on co-integrating vectors to determine
causality relationship and level of significance among equilibrium
established variables. the result indicated that real GDP positively
and strongly associated with physical capital, but negatively and
significantly with budget deficit and political instabilities. The- '""
study could not find strong evidence which supports the existence
of macro instability in the long-run other than short-run impact.
The existence of war as indicator of political instability, adversely
affects real GDP both in the long-run and short-run. In Ethiopia
context, physical capital is found to be more important than human
capital probably due to lesser human capital are accumulated in the
stock.
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Keywords
Capital, Growth