Girma, Estifanos (PhD)Yabru, Ketema Workneh2020-08-262023-11-042020-08-262023-11-042020-05http://etd.aau.edu.et/handle/123456789/22135This study conducted by aiming to answer the question “is Ethiopian external debt sustainable?” Moreover, the study tries to addresses all inter-temporal mechanisms and tests, which assist to get an efficient and all rounded answer, for the question of external debt sustainability. The study utilized a yearly debt data since 1991 to 2018 sourced from World Bank international debt statics, and performed based on two grand (AR and ARDL) models. On the AR model, a stationary tests were performed on discounted external debt and discounted external surplus by employing ADF,PP , Perron1989 and ZA unit root test. where first two tests ADF and PP assumed no structural break, while the third and the forth (Perron1989 and ZA) assumed one and two structural breaks respectively in the model, however the output resulted from all tests proved that both discounted external debt and discounted external surplus are none stationary which entail the Ethiopian external debt is not sustainable. On the other hand, Gregory-Hansen and bound test approach of co-integration test employed based on ARDL models. First, co-integration test between external debt GNP ratio and trade balance GNP ratio has conducted with both bound test approach and Gregory-Hansen co-integration test, but none of the tests shown long-run relationship between the two variables. Next in a similar manner, a co-integration test between external debt and trade balance carried out, but again no long-run relationship come across between the underlined variables and finally the study concluded that the Ethiopian external debt is unsustainable.enExternal debt sustainabilityStationarity and co-integrationThesis