The Financial Determinants of Private Sector Investment: The Case of Ethiopia
International Journal of Science, Technology and Society
Volume 5, Issue 3, May 2017, Pages: 46-54
Received: Oct. 12, 2016; Accepted: Apr. 1, 2017; Published: May 27, 2017
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Author
Brhane Teklay, National Bank of Ethiopia, Applied Economic Modelling and Forecasting (MA), Addis Ababa University, Addis Ababa, Ethiopia; National Bank of Ethiopia, Statistics Mekelle University (BSc), Addis Ababa, Ethiopia
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Abstract
This study mainly emphasized on the financial determinants of private sector investment in Ethiopia using annual time series data from 1975-2015. Using Johansen co integration test they have a significant relationship among variables and OLS regression analysis was undertake to estimate long run model and ECM has been used to find out the short run dynamics. In both long run and short run model the financial determinants variable like broad money supply, bank credit and availability of foreign exchange were positive relation with the private investment. The other macro variable taken was the capital expenditure, which is negatively affect in the long run and positively affect private investment in the short run. The researchers conclude based on past literature result’s capital expenditure is positively association with private investment. The short run dynamics of estimated coefficient ECM which suggests a relatively quick speed of adjustment back to the long-run equilibrium. The findings of the study provide evidence that private investment in Ethiopia, like in other developing countries is affected by important financial and macroeconomic variables. The empirical evidence however has certain important policy implications, and in view of that recommendations have also been provided, in an attempt to help increase and stimulate private investment in Ethiopia.
Keywords
Ethiopia, Private Investment, Financially Determinants, Johannes Co-integration
To cite this article
Brhane Teklay, The Financial Determinants of Private Sector Investment: The Case of Ethiopia, International Journal of Science, Technology and Society. Vol. 5, No. 3, 2017, pp. 46-54. doi: 10.11648/j.ijsts.20170503.14
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Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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