The main objective of this study is to investigate the macroeconomic determinants of economic growth in Ethiopia from 1974-2014. A Vector Error Correction Model (VECM) to cointegration approach is applied in order to investigate the long run and short run relationship between real GDP and its macroeconomic determinants. The finding of the cointegration test shows that there is a stable long run relationship between real GDP, gross domestic saving, labor, human capital, export, FDI, foreign aid and external debt. The long run empirical result reveals gross domestic saving, human capital proxied by government expenditure on health and education, and labor force have positive and significant relationship with real output. However export and real GDP have positive but insignificant relationship.
External debt, foreign aid and FDI have negatively significant relationship with real GDP during the study period. The short run dynamic results shows that human capital, saving and FDI have positive relationship with output growth whereas labor, export, aid and external debt have negative relationship with Real GDP. The coefficient of equilibrating error term (ECM) suggests that the speed of adjustment (feedback effect towards the long run equilibrium) takes few years for full adjustment when there is a shock in the system. In order to sustain long run growth the government or policy makers should design appropriate policies that results in the efficient use of resources contributing to economic growth and proper management of variables resulting to negative growth in order to reverse their effect on output.
Inhaltsverzeichnis (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
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis aims to investigate the macroeconomic determinants of economic growth in Ethiopia using a Vector Error Correction Model (VECM). The study seeks to identify key macroeconomic factors influencing economic growth and analyze their short-run and long-run relationships.
- Macroeconomic determinants of economic growth in Ethiopia
- Application of Vector Error Correction Model (VECM)
- Analysis of short-run and long-run relationships between macroeconomic variables and economic growth
- Identification of key factors influencing economic growth in Ethiopia
- Policy implications for sustainable economic growth
Zusammenfassung der Kapitel (Chapter Summaries)
CHAPTER ONE: INTRODUCTION: This chapter sets the stage for the research by providing background information on Ethiopia's economic growth, outlining the research problem, stating the objectives and justifications for the study, discussing its significance and scope, acknowledging its limitations, and describing the structure of the thesis. It establishes the context and rationale for the subsequent analysis.
CHAPTER TWO: LITERATURE REVIEW: This chapter presents a comprehensive review of existing literature on the theoretical and empirical aspects of macroeconomic determinants of economic growth. It examines various theoretical frameworks and empirical studies, providing a foundation for the research methodology and the interpretation of findings. The chapter culminates in the development of a conceptual framework guiding the research.
CHAPTER THREE: METHODS OF THE RESEARCH: This chapter details the research design, data sources, and econometric model used in the study. It specifies the VECM as the chosen methodology, justifies this choice, and clarifies the data collection and analysis techniques employed to ensure the robustness and validity of the findings. It also explains how the data will be used in the model to explore the relationship between economic growth and its macroeconomic determinants.
CHAPTER FOUR: RESULTS AND DISCUSSIONS: This chapter presents and interprets the empirical results obtained from the VECM analysis. It begins with a descriptive analysis of the data, followed by a detailed explanation of the econometric techniques (unit root tests, cointegration tests, etc.) used to assess the relationships between variables. It presents the long-run and short-run estimates, the results of diagnostic tests, impulse response functions, and forecasts, offering a thorough examination of the findings and their implications.
Schlüsselwörter (Keywords)
Economic growth, Ethiopia, macroeconomic determinants, Vector Error Correction Model (VECM), cointegration, econometric analysis, impulse response function, forecasting, policy implications.
Frequently Asked Questions: Macroeconomic Determinants of Economic Growth in Ethiopia
What is the overall purpose of this research?
This thesis investigates the macroeconomic determinants of economic growth in Ethiopia using a Vector Error Correction Model (VECM). It aims to identify key macroeconomic factors influencing economic growth and analyze their short-run and long-run relationships, ultimately providing policy implications for sustainable economic growth.
What are the main chapters and their contents?
The thesis is structured into four chapters: Chapter One (Introduction) provides background, problem statement, objectives, and study limitations. Chapter Two (Literature Review) examines existing theoretical and empirical literature on macroeconomic growth determinants. Chapter Three (Research Methods) details the research design, data sources, and the chosen VECM model. Chapter Four (Results and Discussions) presents and interprets the empirical results from the VECM analysis, including descriptive analysis, econometric techniques (unit root tests, cointegration tests, etc.), long-run and short-run estimates, diagnostic tests, impulse response functions, and forecasts.
What specific macroeconomic factors are examined?
While not explicitly listed, the research focuses on identifying key macroeconomic factors influencing economic growth in Ethiopia. The analysis utilizes a VECM to explore these relationships, examining both short-run and long-run effects. The specific factors are revealed in the analysis itself, presented in Chapter Four.
What econometric model is used in this research?
A Vector Error Correction Model (VECM) is employed to analyze the relationships between macroeconomic variables and economic growth in Ethiopia. This model allows for the examination of both short-run and long-run dynamics.
What type of data analysis techniques are used?
The research utilizes a range of econometric techniques, including unit root tests for stationarity, cointegration tests to assess long-run relationships, selection of optimal lag length, tests for zero restrictions on long-run variables, model diagnostic tests, short-run error correction model estimation, stability condition checks, impulse response function analysis, and forecasting.
What are the key findings and policy implications?
The detailed findings and their policy implications are presented in Chapter Four. The chapter presents and interprets the empirical results obtained from the VECM analysis, including descriptive analysis, econometric techniques, long-run and short-run estimates, and forecasts. The specific findings and their implications for policy are integral to the conclusion of the study.
What are the limitations of this study?
The limitations of the study are acknowledged in Chapter One. These limitations would likely relate to data availability, model specifications, and the inherent complexities of modeling economic growth.
What are the keywords associated with this research?
The keywords include: Economic growth, Ethiopia, macroeconomic determinants, Vector Error Correction Model (VECM), cointegration, econometric analysis, impulse response function, forecasting, and policy implications.
- Arbeit zitieren
- Asmamaw Kassahun Agdew (Autor:in), 2016, Macroeconomic Determinants of Economic Growth in Ethiopia. A Vector Correction Model, München, GRIN Verlag, https://www.grin.com/document/498084
