The Impact Of Trade Liberalization On The Economic Growth Of Ethiopia

Trade liberalization is the removal or reduction of restrictions on the free exchange of goods and service between nations. These barriers could be tariffs and nontariff which includes; duties, surcharges, licensing rules and quotas. Trade liberalization is a debatable topic. The empirical research analyses the impacts of trade liberalization on Ethiopia economic growth using annual time series data from 1990-2020 by employing VEC model to estimate the long run relationship between trade liberalization and economic growth in the country during the study period. The overall findings of this research is that, trade liberalization have positive and significant long run impact on economic growth of Ethiopia while its short run impact is insignificant. Therefore, the government has to promote more liberal forms of trade policy in order to enhance the economic growth rate of the country. However, doing so without introducing appropriate complementary policies, trade reform alone cannot serve as a magic solution to economic growth.rnKeywords: Trade Liberalization, Economic Growth, Ethiopia, Vector Error Correction Model

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