The Effects Of Foreign Direct Investment And International Trade On Ethiopian Economic Growth

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Foreign direct investment and international trade are considered as essential factors inrnachieving sustainable economic growth. Most theories are in support of their positive influencernon the economic growth of countries. However, empirical studies in this area have presentedrnmixed findings. In the case of Ethiopia, limited number of studies have been conducted on thernindividual variables’ effects on economic growth. Thus, their findings are mostly mixed andrninconclusive. In this regard, this study has been conducted with the aim of examining the effectsrnof FDI and international trade on Ethiopian economic growth over the period 1992 to 2017. Thernautoregressive distributive lag model was employed to analyze the annual secondary datarnamong the variables: real GDP growth, FDI, export, import, remittance, external debt and taxrnrevenue. According to the results, FDI’s effect was positive but insignificant both in the short andrnlong run. Exports have a positive and significant effect both in the short and long run. Importsrnhave a negative effect both in the short and long run but are significant only in the long run.rnRemittance has a positive effect both in the short and long run but significant only in the longrnrun. External debt has a negative and significant effect both in the long and short run. Taxrnrevenue has a positive and significant effect both in the short and long run. Hence, from thernfindings, the Ethiopian government needs to carefully scrutinize its policies regarding FDI as itsrneffect on economic growth is positive but insignificant. Exports are useful for economic growthrnof Ethiopia, hence, policies encouraging exports have to be put in place. However, policiesrntowards import need to be controlling as the rise in imports is resulting in the widening of traderndeficit.

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The Effects Of Foreign Direct Investment And International Trade On Ethiopian Economic Growth

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