Ferede, Tadele (PhD)Desalegn, Gashaw2018-07-112023-11-192018-07-112023-11-192014-06http://etd.aau.edu.et/handle/12345678/7951The aim of this paper is to investigate empirically the ability of Nation Bank of Ethiopia to control the stock of money supply. This investigation seems to conform to the ongoing controversy surrounding the exogeneity /endogeneity hypothesis regarding the money supply i.e. the controllability/non-controllability of the money supply by the Central Bank. The paper has first tested the money multiplier model which says money is exogenous and thus controllable by central banks. We examine the constancy and Stationarity of the money multiplier and the results suggest that the money multiplier remains non stationary for the entire sample period. We then tested cointegration between money supply and monetary base and find the evidence of cointegration between two variables. The coefficient restrictions are satisfied only partially. The result from this model shows it will be difficult to use the money multiplier model as a frame work for monetary policy. The paper attempted to test the post-Keynesian hypothesis of endogenous money for Ethiopia using Granger Causality test. We have found that at all level of lag lengths credit causes broad money but at higher lag length broad money do not cause credit in the sample period. Though the result seems gloomy the endogeneity of money supply is strong.enApplied Economic ModelingThesis