Determinants of Foreign Direct Investment Inflow to Ethiopia: Time Series Analysis

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Addis Ababa University


This thesis focuses on the determinants of foreign direct investment inflows to Ethiopia. In an attempt to attract Foreign Direct Investment (FDI), most countries have liberalized trade and attempted to create enabling environment in recent decades. Ethiopia, like many African countries, took some steps towards liberalizing trade and the macroeconomic regime as well as introducing some measures aimed at improving the FDI regulatory framework. This paper attempts to study the determinants of foreign direct investment inflows to Ethiopia over the period 1991-2017. The study gives an extensive account of the theoretical explanation of FDI as well as reviewing the FDI regulatory framework of the country over the study period. It also undertakes empirical analysis to establish the determining factors of FDI inflows to Ethiopia. Our findings show that macroeconomic instability and financial health, among others, have negative impact on FDI. These findings imply that financial health and macroeconomic stability are essential to attract FDI to Ethiopia.



Determinants, Ethiopia, FDI