The Impact Of Financial Development On Economic Growth Of Ethiopia

The study focuses on the investigation of the financial development proxies that affect therneconomic growth of Ethiopia. The purpose of this study is, therefore, to investigate the significantrndeterminants and recommend courses of action to be taken by authorities. Quantitative researchrnapproach is applied using econometric model estimated VAR multiple linear regression andrndescriptive quantitative analysis technique. The study has found that in the short run, except twornindicators of financial development (DC/GDP & PC/DC), all other variables turned out to bernstatistically insignificant. But in the long run, all proxies of financial development have farrnreaching statistically significant impact on the economic growth of Ethiopia. The paper concludedrnthat the development of financial sector significantly affects the performance of the economy. Thernmain recommendations are : Strengthening of the trade balance and openness, cut budgetaryrndeficit, increase in the interest rate, and the NBE shall take measures that enhance financialrninclusion and improve the platform of required infrastructure in collaboration with the designatedrnorgans of the government.

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