Determinants Of Foreign Direct Investment Flows In Ethiopia

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This paper attempts to examine the determinants of Foreign Direct Investment flow in Ethiopia.rnThe study applies multivariate ordinary least square regression by using time series datarncovering over the period 1974 to 2015. In order to point out the main factors that can highlyrnaffect the inflow of FDI in Ethiopia and to know how much these factors affect FDI leading to anrnoscillating trend, the study took the determinant of FDI in Ethiopia such as infrastructurerndevelopment, the domestic market size and growth potential, macroeconomic stability, humanrncapital development, openness, and external debt and evaluate as to how they affect therninflow of FDI. In the analysis there are findings. Firstly, I found that the explanatory variablernsuch as macroeconomic stability measured by inflation rate, and openness have significant andrnnegatively related to FDI. Second, exchange rate and school enrollment rate proxy ofrnmacroeconomic stability and human capital development respectively are found positivelyrnrelated and statistically significant to the inflow of FDI. Thread, gross fixed capital formationrnand real GDP growth rate proxy of infrastructuresrnand market size respectively havernstatistically significant and positively related to FDI. Last, foreign debt has negative andrninsignificant effect on FDI. These findings imply that inflation and trade openness should berncontrolled and improved by giving special attention.rnKey words: FDI, FDI determinants, time series, ordinary least square regression

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Determinants Of Foreign Direct Investment Flows In Ethiopia

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