Macroeconomic Determinants of Economic Growth in Ethiopia. A Vector Correction Model

Table of Contents

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

1.2 Statement of the problem

1.3 Objectives of the study

1.4 Justifications of the study

1.5 Significance of the study

1.6 Scope of the study

1.7 Limitations of the study

1.8 Organization of the paper

CHAPTER TWO: LITERATURE REVIEW

2.1 Theoretical Literature Review

2.2 Empirical Literature Review

2.3 Conceptual Frameworks

CHAPTER THREE: METHODS OF THE RESEARCH

3. Research Design

3.1 Data Source

3.2 Model specification

CHAPTER FOUR: RESULTS AND DISCUSSIONS

4.1 Descriptive Analysis

4.2 Econometric Analysis

4.2.1 Unit Root Test for Stationerity

4.2.2 Selection of optimal lag length

4.2.3 Results of Cointegration Tests and Long run Estimation

4.2.4 Test for zero restriction on long run variables and interpretations of result

4.2.5 Model diagnostic tests

4.2.6 Short Run Error Correction Model

4.2.7 Stability condition of the model

4.2.8 Impulse response function

4.2.9 Forecasting

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion

5.2 Recommendations

Objectives and Research Themes

This study aims to provide a comprehensive and critical exploration of the macroeconomic determinants of economic growth in Ethiopia for the period 1974-2014, utilizing a Vector Error Correction Model (VECM) to analyze both short-run and long-run relationships among key economic variables.

• Macroeconomic determinants of economic growth in Ethiopia.
• Interaction of variables within the growth process.
• Analysis of short-run and long-run relationships using VECM.
• Evaluation of the impact of domestic resource mobilization versus external resources.

Excerpt from the Book

Summary of Chapters

CHAPTER ONE: INTRODUCTION: Presents the background, problem statement, objectives, significance, and scope of the study regarding economic growth in Ethiopia.

CHAPTER TWO: LITERATURE REVIEW: Reviews relevant theoretical models and empirical literature to establish a conceptual framework for the analysis.

CHAPTER THREE: METHODS OF THE RESEARCH: Details the research design, data sources, and the VECM methodology used for the analysis.

CHAPTER FOUR: RESULTS AND DISCUSSIONS: Provides a comprehensive descriptive and econometric analysis of the collected data and model outcomes.

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS: Concludes the research findings and suggests policy recommendations for economic growth management.

Keywords

Economic growth, Determinants, VECM, Ethiopia, Gross Domestic Product, Gross domestic saving, Labor force, Foreign direct investment, Foreign aid, External debt, Human capital, Cointegration, Time series analysis, Macroeconomic, Economic policy.

Frequently Asked Questions

What is the core focus of this research?

The research focuses on identifying the primary macroeconomic determinants that have driven or hindered economic growth in Ethiopia from 1974 to 2014.

What are the central themes addressed in the work?

The work examines the roles of saving, labor force, human capital, exports, foreign direct investment, foreign aid, and external debt in the context of Ethiopia's economic growth performance.

What is the primary objective of the study?

The primary objective is to conduct a critical and comprehensive exploration of the long-run and short-run relationships between real GDP and its macroeconomic determinants in Ethiopia.

Which scientific methodology is utilized?

The study employs a Vector Error Correction Model (VECM) approach, which allows for the analysis of cointegration and dynamic relationships between non-stationary time series data.

What does the main body of the paper cover?

The main body covers the theoretical and empirical literature review, research methods, a detailed descriptive analysis of variables, and econometric testing including unit root tests, cointegration tests, and short-run error correction models.

Which keywords characterize this paper?

Key terms include economic growth, determinants, VECM, Ethiopia, saving, labor force, FDI, foreign aid, external debt, and human capital.

What does the empirical result reveal about foreign aid in Ethiopia?

The study indicates that foreign aid has a negative and significant relationship with real GDP growth in Ethiopia during the study period, likely due to institutional weaknesses and potential misallocation.

How does the study evaluate the impact of human capital?

Human capital is proxied by government expenditure on health and education, and the empirical results show it has a positive and significant relationship with real GDP, supporting endogenous growth theories.

What conclusion does the author reach regarding saving?

The author concludes that saving is a significant positive driver of economic growth and recommends that the government prioritize saving mobilization through financial institution expansion and other policy measures.

How is the stability of the model determined?

The model stability is verified using a unit root circle for the companion matrix, where the results indicate that all points lie within the unit circle, confirming a stable model that converges to equilibrium.