The Financial Determinants Of Private Sector Investment The Case Of Ethiopia

This study mainly emphasized on the financial determinants of private sector investment inrnEthiopia using annual time series data from1975-2015. Using Johansen co integration test theyrnhave a significant relationship among variables and OLS regression analysis was undertake tornestimate long run model and ECM has been used to find out the short run dynamics. In both longrnrun and short run model the financial determinants variable like broad money supply, bankrncredit and availability of foreign exchange were positive relation with the private investment.rnThe other macro variable taken was the capital expenditure, which is negatively affect in thernlong run and positively affect private investment in the short run. The researchers concludernbased on past literature result’s capital expenditure is positively association with privaterninvestment. The short run dynamics of estimated coefficient ECM which suggests a relativelyrnquick speed of adjustment back to the long-run equilibrium. The findings of the study providernevidence that private investment in Ethiopia, like in other developing countries is affected byrnimportant financial and macroeconomic variables. The empirical evidence however has certainrnimportant policy implications, and in view of that recommendations have also been provided, inrnan attempt to help increase and stimulate private investment in Ethiopia.rnKey words: Ethiopia, private investment, financially determinants, Johannes co-integration.

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