Determinants Of Domestic Private Investment In Ethiopia

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For the last couple of decades, there are several economic and political reforms has been donernto increase the performance of private investment in Ethiopia; but the actual performance ofrnprivate investment was very low. This paper conducted with the main objective of identifying therndeterminants of private investment in Ethiopia. A time series data has been used for the period ofrn1992-2020. The researcher has been applied Domestic Private Investment as dependent variablernand; Exchange rate, Federal money reserve, Inflation rate, Interest rate, loan for private sector,rnand loan for public investment as independent variables. Augmented dickey Fuller test wasrnutilized to conduct unit root test to all variables; the result has been some variables werernstationary at level and the rests were at 1st difference. Thus the analysis is used ARDL model inrnorder to check the relationship between variables. The ECM, bound test and long run resultrnshowed that in short run, the interest rate and Federal Reserve Money affect Domestic privaterninvestment positively, however exchange rate and loan for private investment affect negatively;rnLikewise long run positive relationship exist exchange rate, nominal gross domestic product and loan forrnprivate investment as well. This shows there should be an intervention made by the Ethiopianrngovernment and respective body together, on creating stable investment environment throughrnencouraging production of domestic products, access to loan for private sector and controllingrnthe factors that alter interest rate and exchange rate; furthermore the government should retainrnFederal reserve money to increase financial resources as of to increase the performance ofrndomestic private investment in the country. Finally, the policy makers should conduct detailrninvestigation, and extensive studies on exchange rate, interest rate and proper utilization of loanrnissues.

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Determinants Of Domestic Private Investment In Ethiopia

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