DETERMINANTS OF ECONOMIC GROWTH IN ETHIOPIA

Abstract

Financial liberalization and Banking sector has a strong relationship to achieve economic growth that is Ethiopian government try to liberalize the financial sector. This paper attempts to assess the effect of financial liberalization and banking sector development in economic growth in Ethiopia. The study used quantitative research design. In order to achieve the objective of the study, unit root test were used for the period of 1989-2020. Data were analyzed on quantitative basis using descriptive and regression analysis ARDL method. The obtained result from ARDL given that exchange rate, trade balance, inflation rate and private sector investment were statistically significant and have positive relationship with economic growth. On the other hand, variable like trade balance was statistically significant and has negative relationship with economic growth. Lending rate has positive relationship with economic growth nevertheless it is statistically insignificant. From the result, exchange rate and saving deposit rate would no doubt enhance economic growth and the governments in the country have to intensify efforts that provide better financial system.