Determinants Of Foreign Direct Investment In Ethiopia An Autoregressive Distributed Lag Approach

This paper attempts to study the determinant of FDI in Ethiopia for the time period fromrn1980-2015. To this end, the study has reviewed theoretical explanations relating to therndeterminants of foreign direct investment and the study has also reviewed relevant empiricalrnliteratures focusing on the determinants of FDI in the context of developing countries. UsingrnData on foreign direct investment and number of telephone users that is obtained from UnitedrnNations Conference on Trade and Development (UNCTAD). Real effective exchange rate,rninflation rate, export and import data were obtained from National Bank of Ethiopia (NBE),rnand Ethiopia Real GDP from Ministry of Finance and Economic Development (MoFED). Byrnadopting model that was used by Erdal Demirhan etal (2008) this paper examine prominentrndeterminants of FDI and finds that economic growth, macroeconomic stability, openness torntrade are important determinants of foreign direct investment. The results suggest policyrnmakers should give due attention to promoting liberalization and implementing soundrneconomic policies that can ensure macroeconomic stability in the country.

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