Determinants of CapitaI Market DeveIopment in Ethiopia

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dc.contributor.advisorAbebaw
dc.contributor.authorHermela Gebreselassie
dc.date.accessioned2026-11-03T13:01:37Z
dc.date.available2026-11-03T13:01:37Z
dc.date.issued2026-06-02
dc.description.abstractCapital market development plays a vital role in mobilizing long-term savings, promoting investment, and supporting economic growth. This study examines the relationship between inflation, interest rates, and capital market development in Ethiopia using annual time-series data from 1990/91 to 2024/25. Due to the recent establishment of the Ethiopian Securities Exchange (ESX) and limited historical capital market data, the study uses financial development indicators as proxies for capital market development. Secondary data were obtained from the National Bank of Ethiopia, the Ethiopian Statistical Service, and other relevant sources. The analysis employed descriptive statistics, Augmented Dickey-Fuller (ADF) unit root tests, Johansen cointegration analysis, and the Vector Error Correction Model (VECM) to examine both short-run and long-run relationships among the variables. The findings reveal that inflation has a significant negative effect on capital market development, indicating that macroeconomic instability can hinder financial market growth and long-term investment. Interest rates show mixed effects, reflecting their complex influence on savings, investment, and financial sector development. The results also confirm the existence of a long-run relationship among the variables, emphasizing the importance of a stable macroeconomic environment for capital market growth. The study concludes that maintaining price stability and an efficient interest rate environment can support the development of Ethiopia’s emerging capital market. Future studies should reassess these relationships as more comprehensive capital market data become available through the expansion of the Ethiopian Securities Exchange
dc.identifier.urihttps://etd.aau.edu.et/handle/123456789/9261
dc.language.isoen
dc.publisherAddis Ababa University
dc.subject: Capital market development
dc.subjectinflation
dc.subjectinterest rates
dc.subjectESX
dc.titleDeterminants of CapitaI Market DeveIopment in Ethiopia
dc.typeThesis

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