27 regional average. Unlike some of the previous studies on this subject, we have used the newly developed ARDL bounds testing approach to cointegration and the ECM-based causality model to examine this linkage. We have also included two intermittent variables, namely: financial development and investment, in order to address the omission-of-variable bias in our causality model. In addition, we have used two proxies to measure the level of poverty in Ethiopia, namely: household consumption expenditure and the infant mortality rate. Our results show that there is short-run bi-directional causality between poverty reduction and economicgrowth – irrespective of which variable is used as a proxy for poverty reduction. However, in the long run, the study finds a unidirectional causal flow from infant mortality to economicgrowth; but it fails to find any causal relationship between household consumption expenditure and economicgrowth. The study, therefore, concludes that while poverty reduction and economicgrowth in Ethiopia are mutually beneficial in the short run; in the long run, it is economicgrowth that leads to poverty reduction when infant mortality rate is used as a proxy for poverty reduction.
during 1995–2002, at about 4.6 percent. In contrast, growth in coffee exports stagnated over the same timeframe, although coffee still ranks as Ethiopia’s most important exportable crop. In the two export growth scenarios, output of both traditional and nontraditional exportables is assumed to grow by 13 percent—an additional 8.4 and 11.2 percent, respectively, above their average yearly levels during 1995–2002. As discussed above, these rates were determined to be quantitatively comparable with those delineated for the staple crop and livestock subsectors (1.5 and 3.4 percent growth over baseline levels, respectively). Achieving 1 percent annual growth in the production of nontraditional exportables requires much higher growth in actual exports—as much as 29 percent per year over the simulation period. In the absence of possible market constraints, export subsector growth of this magnitude could induce overall economicgrowth of 3.6 percent per year, and agricultural growth of 3.4 percent per year. Nevertheless, the overall contribution of this growth to poverty reduction is relatively small. The poverty rate only falls 4.2 percentage points below baseline levels, to 40.2 percent (Table 6, column 4). Additional growth in coffee exports has a similar modest poverty reduction effect in the model simulations.
Hoddinott and Haddad (1995) show that, in Cote de Ivoire, increasing women’s share of cash income significantly increases the share of household budget allocated to food, controlling for average per capita expenditure, household size and demographic characteristics. Increases in women’s share of cash income are also associated with decreases in the share allocated to alcohol and cigarettes. In Brazil, Thomas (1997) finds that additional income in the hands of women results in greater share of household budget devoted to education, health and nutrition- related expenditures. For Ghana, Duflo and Udry (2004) show that households spend a larger share of budget on food and on private goods for women in years when the production of women’s crops is higher; conversely, households spend a larger share of the budget on alcohol, tobacco and on goods consumed by men in years when the production of men’s crops is higher. Given the evidence that women’s control over resources affects expenditure patterns, it is not surprising that there is also evidence that mothers’ greater control over resources improves child outcomes. Using data from rural northeast Brazil, Thomas (1990) shows that increases in women’s unearned income (pensions, social security, workers’ compensation, rent and assets and gifts) relative to that of men increase per capita caloric intake and children’s nutritional status (weight-for-height z-scores). He also finds large impacts on the probability of child survival: the impact of an increase in unearned income owned by women is 20 times that of similar increases in unearned income owned by men. Using data on assets brought to the household upon marriage, Quisumbing and Maluccio (2003) find that in Ethiopia, Indonesia (Sumatra), and South Africa, mothers’ assets tend to have a larger impact on children’s educational attainment than do fathers’ assets.
Osinubi (2005) as well examined the impact of economicgrowth on unemployment and poverty in Nigeria using annual time series data (1970- 2000) and using a three stages least square (3SLS) estimation. The variables selected for the study were unemployment, inflation, and index of agricultural production, index of petroleum production, money supply, exchange rate, and changes in real GDP, savings, work stoppages and trade disputes. The result reveled that growth is negatively related to poverty and positively related to unemployment against to “Okun’s Law”. The study recommended policy makers to reduce the income inequity to overcome poverty and low growth in Nigeria .Noor et al., (2007) also investigated the impact of economic grown unemployment in Bangladesh over the period of 1970 to 2004 and using ordinary least squares. The result showed that economicgrowth has negative impact on unemployment. Extra researchers also investigated empirically the impact of unemployment on economicgrowth such as Amino, et al (2013) for Nigeria, UK Essay (2008) for EU countries, Maria J., et al (2012) for Peru, Rafiq M., et al (2010) for Pakistan; all found that economicgrowth and unemployment were negatively related. El – Agrody et al. (2010) emphasized on the economic study of unemployment and its impact on Egypt’s GDP (1994- 2004),using Simple and multiple linear regression analysis and involving nine variables viz., privatization, population, consumption, expenditure, interest rates, exchange rates, technology, agricultural domestic product, real wage rates, and agricultural investment. The results revealed a significant positive impact of unemployment, investment, exchange rate and average per capita share of GDP on the Egypt’ s GDP. Privatization and population growth were indicated as the main reasons of increasing unemployment. The study recommended for revision of privatization policy and reduction of the interest rates in order to lower the agricultural unemployment. The above empirical studies conformed significant negative impact of unemployment on economicgrowth. Hence, taking the above literatures as a hint and base line, this study empirically investigates the impact of unemployment on economicgrowth in Ethiopia.
From (Appendix 1.3); Table 5.5 and Equation 5.18 it is clear that the estimated error correction model explains a large part of the observed variation. 13 The Durbin-Watson statistic indicates that the residuals are almost white noise, with only slight positive serial correlation. Our short run estimates from the error-correction version reflect to some extent the long run results. The gross enrollment ratio, which is denoted by H is positively related to the rate of growth of real gross domestic product per capita, and the coefficient for openness T is negative and significant, but aid is no longer statistically significant. Similarly, the sign of the grant variable maintains the same negative sign as in the long run relationship, though the loan variable enters with a positive sign, but both are not significant. This indicates that in the short run aid has no significant impact on economicgrowth. Combining the insights from the long-run and the short run relationship aid in the form of grant seems to have a cumulatively negative impact on growth, while nothing can be said about the effect of loans, as this variable is not significant in both the short and the long run. The significance of the variable H provides important information. That is, the increasing of school enrollment ratio and level of schooling is contributing to the increment of total productivity not only in the long run but also in the short run case. Since the coefficient for openness is consistent to the results obtained earlier the main justification is similar. The negative impact of trade, which is effect from the unbalanced relationship between export earning and import payments in the short run is the same as in the long run case, implies the problem is not time specific.
Whereas the NPPE emphasises the importance of economicgrowth and poverty reduction as a means to tackle population growth, mainly through high fertility rates, the Sustainable Development and Poverty Reduction Program (SDPRP) introduced in 2002, and followed up by another SDPDR in 2005, does not say much about the role of population and fertility for poverty reduction. In fact, reduction in population growth through reduced fertility does not appear as a crucial policy instrument to combat poverty. The SDPRP does however make a strong commitment to combat and reduce gender imbalances in Ethiopian society. The SDRPR also put strong focus on education, and an important policy goal is to increase enrolment rates and educational infrastructure. However, not much emphasis is put on how to reduce strong gender imbalances in education. Though the SDPRP emphasises the importance of improving health provision at the community level, it is explicitly stated that priority is given to prevention of diseases, whereas improvements in family planning and increased use of modern contraceptives seems to have given less focus. Though, the SDPRP does not mention the population control as a specific policy measure, it is clear that improvements in health provision and education (certainly if the gender dimension is properly addressed), its implementation should have an impact on reducing fertility which is line with the objectives stated in the NPPE.
According to (John W. & Paul, 2010), if a country could maintain a growth rate in agricultural GDP of six percent, it could provide enough employment growth to contribute to the rapid economic transformation of the economy and rapid decline in poverty. But, according to (World Bank, 2016) out of the overall average yearly growth rate of 10.9 percent between 2004 to 2015, agriculture grew by only 3.6 percent while service grew by 5.4 percent and industry grew by 1.7 percent. The country is following an economicgrowth and development strategy known as ADLI (agricultural development led industrialization) (Government of Ethiopia, 2016). This strategy is supported by an economic reform program developed in cooperation with the World Bank and the International Monetary Fund (IMF) and on a series of structural adjustment programs since 1992. The long term objective of this strategy was achieving industrialization through the development of the agricultural sector (Government of Ethiopia, 2016). But, this long term objective has not been achieved even after a quarter of a century after its inception.
Second, with regard to modelling, the study employs a multivariate causality model, which has been confirmed to perform better than the bivariate model. The traditional bivariate model used in previous studies is known to suffer from omission-variable-bias (see, for example, Gómez-Puig and Sosvilla Rivero, 2015), while the multivariate Granger-causality approach has the advantage of eliminating spurious correlations and also increasing the general validity of the causation test (Lutkepohl, 1982). Third, unlike most past studies on the subject which make inferences based on cross-sectional Granger-causality tests, this study conducts causal tests for a specific country, Zimbabwe (see Donayre and Taivan, 2017; Panizza and Presbitero, 2014). The chosen approach in this study has the advantage of capturing country-specific factors.
So, is fiscal adjustment important to the restoration of Zimbabwe’s economic fortunes? Fiscal policy is the dominant and compelling instrument used in most economies to achieve macroeconomic stability, but its usefulness as a driver of economicgrowth driver is less certain. Some studies postulate that well-functioning fiscal policies accelerate economicgrowth by triggering both public and private sector productivity, while poorly functioning fiscal policies are an obstruction to economic progress and exacerbate poverty. Government expenditure led growth is grounded in the Keynesian model which resonates well with the endogenous growth proponents who contend that productive government expenditure has great potential to stimulate private investment (Barro, 1990). However, proponents of the neo-classical growth model are mute on government spending’s contribution to a nation’s growth trajectory (Nurudeen and Usman, 2010). It is apparent, then, that existing the literature on the public expenditure-economicgrowth nexus in Zimbabwe is inconclusive.
The significant branch expansion was undertaken by Commercial Bank of Ethiopia but comparing with the previous years the share of public banks in total branch network slightly went down to 45.4 percent at the end of 2013/14 from 50.3 percent last year (NBE, 2013/14). Coming to microfinance institutions and insurance companies they are increasing in number following Proclamation No 40/1996 and they become solution for the market failure exist in the sector, because of low capacity of commercial banks. But still an estimated 80% of potential rural demand for loans is still unmet being one of key constraints on growth and development of enterprises. For this, lack of management information system and auditing, lack of Funding sources for expansion, poor linkage between financial institutions and supervision and regulation by NBE are listed as a cause (Gesesse, Amha, Mommartz, Steel, & William, 2008).
The Ricardian-Heckscher-Ohlin trade model drawn from Solow's (1957) model points out that since the country allocates its resources more efficiently after opening up based on its comparative advantages that openness to international trade will bring only a one-time increase in output, therefore having no implications for long-run growth. This led to this study investigating the causal relationship between economicgrowth and trade openness in Argentina covering the period between 1970 and 2016. Foreign direct investments and capital are incorporated as additional variables to form a multivariate framework. The findings from the ARDL bounds test validated the existence of a long run relationship between economicgrowth, trade openness, foreign direct investment and capital in Argentina. The results further indicated that there is a long run causality flowing from trade openness, foreign direct investment and capital to economicgrowth. These results presents a fresh perspective to trade policy makers in Argentina.
8 Theoretically, the financial development and economicgrowth nexus can be traced back to Schumpeter (1911), whose notion was that financial development leads to economicgrowth. He emphasised that financial institutions and entrepreneurship were necessary and sufficient conditions for economicgrowth and concluded that, to the extent that the financial structure of an economy facilitates the migration of funds to the best user, it leads to the accelerated growth and performance of the country. McKinnon (1973) and Shaw (1973) later supported this view by arguing that government quantitative restrictions on the banking system restrain the volume and the productivity of investments, which impedes economicgrowth. In their view therefore, financial sector development – through the development of financial markets and high interest rates, and therefore investment – has a positive effect on economicgrowth.
The results of Model 2, reported in Table 7b, show that in Uganda, there is bidirectional Granger-causality between financial development and economicgrowth when financial development is proxied by deposit money bank assets as a ratio of bank assets (DMBA). However, these results apply only in the short run. These results are consistent with the feedback hypothesis where economicgrowth and financial development are mutually causal; and are consistent with results of several other studies (see Akinlo and Egbetunde 2010; Cheng, 2012; Jedidia et al., 2014, among others). Model 2 results further reveal that there is: (i) short- run bidirectional Granger-causality between economicgrowth and inflation; (ii) long-run and short-run unidirectional Granger-causality from economicgrowth to savings; (iii) short-run bidirectional Granger-causality between inflation and savings; (iv) long-run unidirectional Granger-causality from inflation to savings; and (v) no causality between savings and financial development (DMBA); and between inflation and financial development (DMBA).
This study has explored the causal relationship between energy consumption and economicgrowth – using the time-series data from Ethiopia during the period from 1971 to 2013. The study is fundamentally different from the majority of previous studies on energy-growth causality nexus in that it has used a multivariate framework – with financial development, investment and trade openness as the intermittent variables. The study has also utilised the ARDL bounds testing approach to co-integration and the ECM-based Granger-causality tests to examine this linkage. The results of this study show that in Ethiopia, there is a distinct unidirectional causal flow from economicgrowth to energy consumption. These results apply, irrespective of whether the estimation is done in the short run or in the long run. The study, therefore, recommends that in Ethiopia, policy makers should consider expanding their energy-mix options, in order to cope with the future demand arising from increased economicgrowth.
Accordingly the main focus of this study is to see the overall relationship between inflation and economicgrowth and other factors which determine economicgrowth in Ethiopia. By employing 42 year time series data and using econometric analysis. What distinguishes this study from previous researchers is that, the present study investigates the current trend of variables included under the model there by take account of recent data. Therefore, this paper is also significant by filling the time gap using data’s ranging from the year 1975-2016. As a result, the study is motivated by the basic questions raised in the following section to partially fill in the existing literature, time and variable gap by examining the effect of inflation on economicgrowth from the context of Ethiopia. Therefore, the paper comes up with a conclusion on the contradictory idea of “whether inflation is an indicator or obstacle for economicgrowth” in Ethiopian economic context with methodology at hand.
This finding is in line with other related researchers’ result. For example, Jha (2007) indicated that, changes in total tax and public expenditure affect the level of aggregate demand in the economy. Structure of tax and public expenditure, on the other hand, affect the incentive to save and invest, take risk, and export and import goods and services. In addition, Kneller, Bleaneyand and Gemmell (1999) also clarified that, productive expenditures financed by non-distortionary taxes enhance growth rates, while those financed by distortionary taxes have an ambiguous effect. Furthermore, non-productive expenditures financed by distortionary taxes are predicted to have a negative impact on growth but no discernible impact when a non-distortionary tax is used. Similarly, King and Rebelo (1990) concluded that for small developing economies with mobile capital, national taxation policies can lead to either ‘development traps’ or ‘growth miracles’.
To this end, an econometric procedure is taken to regress the variables those have an impact on Ethiopian economicgrowth (namely, Gross domestic product, inflow remittances, foreign direct investment net inflows, Inflation consumer prices, general government final consumption expenditure, gross fixed capital formation, openness to international trade, human capital and Population growth). Johansen Cointegration approach is used to analyze the relationship between remittances and economicgrowth. The augmented dickey fuller test was undertaken to stationary test and all the variables are stationary at first difference AR (1). The result of Johansen Cointegration also shows that there is a long run co-integration between dependent and independent variables. An ECM was used to examine short runs dynamics and correct for short run disequilibrium.
Economic development is one of the foremost objectives of every country and economicgrowth is the primary feature of economic development. Thus, increasing gross domestic product is most important for any economy. There are many approaches to accomplish this target to which one possibility is to promote the exports. There exist a vast literature that shows the relationship as well as the direction of causality between exports and economicgrowth of the country. At this point, an important question clicks in the mind of economists and researchers is that whether the economicgrowth leads to exports growth or exports promotion leads to economicgrowth. Thus the different economists have different ideas about the question. One school of thought has a favorable view about the export-led growth hypothesis while the other argues in the favor of growth driven export hypothesis. Some economist also thinks that there is abi-directional relationship between export and economicgrowth.
In the Ethiopian context, researches are scarce. According to Teklebirhan Alemu (2015), physical public infrastructure investment has a crowding in effect on private investment and shows significant positive impact on output growth, and above stimulate private investment both in the short and long run. Admasu Shiferaw et.al, (2013), in his study on road infrastructure and enterprise development dynamics showed that better road access increases a town’s attractiveness for manufacturing firms. The study also confirms towns with initially large number of firms continue to attract more firms, and there is a tendency towards convergence in the distribution of firms through reducing their geographic concentration. Yetnayet Ayalneh (2012), in evaluating transport network structure in Addis Ababa identified there is inadequate levels of infrastructure in parts of the current road network, particularly, the peripheral areas suffer from lack of roads and roads in the central areas have capacity limitation.