The Effectiveness of Fiscal Policy in Driving Economic Growth in Ethiopia: A macro-economic perspective
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Date
2024-09-07
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A.A.U
Abstract
This study examines the effectiveness of fiscal policy in driving economic growth in Ethiopia
from a macroeconomic perspective, using time-series data spanning 1991 to 2023. Employing
the Autoregressive Distributed Lag (ARDL) model, focusing on key variables such as
government expenditure, government revenue,ivestmet,inflation, interest rates, and real GDP
growth. The analysis reveals that Ethiopia's fiscal policy, characterized by significant
government spending on development projects, has contributed to sustained economic growth
despite persistent fiscal deficits. However, the findings highlight challenges such as inflation
volatility, inefficiencies in revenue collection, and the reliance on borrowing to finance deficits,
which undermine macroeconomic stability. The study underscores the need for improved policy
coordination to enhance revenue mobilization, control inflation, and optimize public spending,
ensuring fiscal policy continues to support sustainable growth in Ethiopia.