Determinants of Private Investment In Ethiopia: An Ardl Approach

Abstract

One of the main engines of economic is private investment. As a result, the objective of this study was to investigate determinants of private investment in Ethiopia. The researcher employed a quantitative research approach with an explanatory research design to achieve the objective. study empirically tests whether Real GDP, inflation rate, real interest rate, foreign direct investment, tax rate, exchange rate, population growth rate, unemployment rate, international trade openness, education affect the growth of private investment in Ethiopia or not. The study focused based on 30 years of secondary data (i.e. from 1991 to 2020) on key variables. Multiple regressions using the ARDL model with appropriate software E-views 9 was applied. The ECM which indicates the speed of adjustment from short run towards long run. The main finding of the study indicated ln real GDP, population growth rate, rate interest, trade openness, and unemployment rate was statistically significant at 5% level of significance in the long run and short-run and also exchange rate was a positive and statistically significant effect on private investment in only short-run. Finally unemployment has adverse effect on private investment, the policy choice on the matter need a vigilant decision. Combined policy tools shall be used to achieve the great short run and long run targets. DOI: 10.7176/RJFA/13-7-03 Publication date: April 30 th 2022