Geda, Alemayehu (Dr)Kebbie, Alfred2021-07-222023-11-042021-07-222023-11-041998-06http://etd.aau.edu.et/handle/123456789/27304This Thesis investigates the relationship between foreign capital (subsequently debt) and Growth on the one hand, and the effect of debt overhang on private investment in Ethiopia On the other hand. In the first part, a debt-growth relationship based on a marginal condition (partial derivative) was formulated. The contribution of foreign capital to growth shows mixed results. During the Imperial era and under the TGE, foreign capital contributed positively to growth, while during the Derg era the contribution was negative. In the second part, using an accelerator principle, a private investment model having debt overhang as one of the explanatory variables was developed. The effect of debt overhang on Private investment was found to be insignificant in the shoi1-run, but the long-run t-statistic Of the debt overhang indicate the possibility of debt overhang in the long run.enEconomic Growth and Foreign DebtThesis