Fantu, Guta (PHD)Abreham, Belew2021-02-112023-11-042021-02-112023-11-042020-10http://etd.aau.edu.et/handle/123456789/25081study examines the short run and long run relationship between bank sector development and economic growth in Ethiopia. It covers the annually time series data from 1981-2018 and it used Vector Error correction Models for estimation technique and Granger Causality test check the direction of causality. The finding supports that there is no significant relationship between bank sector development and economic growth in short run, but in long run bank sector development has significant negative effect on economic growth. This result is different from theoretical expectation, but it turns out the current situations and inefficiency of banking sector in providing loans to private sector. This is evidenced by the State-owned banks have on average of 46 percent of total loan disbursed by banking industry in the year 2014/15-2018/19. The ganger causality result shows unidirectional causality from bank sector development to economic growth. It recommends to the government to increase the monitoring and supervisor role of monetary authority (National Bank of Ethiopian), should liberalize the sector, create favorable banking environment to bring competition between them.enBank SectorEconomic GrowthVector Error CorrectionFinancial developmentThesis