Foreign Direct Investment and Ethiopian Economy :Determinant and Impact Analysis
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Date
2018-06
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Addis Ababa University
Abstract
Considering the empirical and literature debates and gaps on determinant and impact of FDI,
the main objective of this study was to investigate the SR and LR determinants and impacts of
FDI on the Ethiopian economy on real GDP, Domestic Investment, and Employment. The study
used an Autoregressive Distributed Lag Model with a Bound Test for Co-integration in
analyzing the multivariate time series data which covers from 1992-2017 in exploring the SR and
LR relationship of the variables .Findings of the study for the determinants show, in the long run,
domestic investment, exchange rate, trade openness and human capital have a positive
relationship with FDI inflows. On the other hand, rate of inflation has a negative relationship
with FDI. In the long run all variables are statistically significant except rate of inflation. In the
short run, FDI inflow of the previous year has a negative and significant effect on FDI and
lagged human capital and lagged trade openness are found positive and significant effect on the
FDI inflow. Finding of the study for the impact shows, in the short run and long run FDI inflows
have a positive impact on domestic investment and real GDP. The impact of FDI on employment
is positive and highly significant in the long run although it is insignificant in the short run. The
results in this study imply the need for proper management of the inflationary pressures on the
economy which affects FDI inflows negatively. So, the nation’s monetary authorities develop and
implement measures that will effectively manage all inflation, and sustained at levels that will
guarantee increasing the level of inflow of FDI.
Description
A thesis submitted to college of business and economics
In partial fulfillment of the requirement for the degree of
Executive master of business administration (EMBA)
Keywords
Foreign Direct Investment, Ethiopian Economy