Impact of Foreign Direct Investment on Economic Growth in Ethiopia

Urgessa Firomsa Fite

doi:doi:10.11648/j.ajtab.20200604.14

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Impact of Foreign Direct Investment on Economic Growth in Ethiopia

Urgessa Firomsa Fite

Published in American Journal of Theoretical and Applied Business (Volume 6, Issue 4)

Received: 15 October 2020 Accepted: 9 November 2020 Published: 23 November 2020

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Abstract

The aim of the study is to investigate the Impact of Foreign Direct Investment on economic growth in Ethiopia by using annual time series data from the periods of 1982 to 2018. To achieve this objective the Descriptive and Econometric analysis were processed. The Ordinary Least square (OLS) method approach was employed to assess the model in the long run. The empirical results points out that as foreign direct investment has a positive and significant impact on the economic growth of Ethiopia. Beside this other variables such as gross capital formation, gross domestic saving and infrastructural level also have positive and significant contribution on the economic growth and enhance the growth of the country. Error-correction model (ECM) has been used to support the existence of a stable long-term relationship and confirm a deviation from the long-term equilibrium. The finding of error-correction model revealed that there was a deviation of the actual growth of the country from its equilibrium value that eliminated every years and indicates a short run deviation of growth from the long run equilibrium. In doing so, the Diagnostic and Unit root tests were conducted to guard the model from spurious results. Based on the finding of the study the researcher recommended that all concerning bodies to be utilized properly and wisely the opportunity of foreign direct investment out comes as it continues to increase the economic growth and motivate them as they enter in to the country for investment.

Published in	American Journal of Theoretical and Applied Business (Volume 6, Issue 4)
DOI	10.11648/j.ajtab.20200604.14
Page(s)	72-78
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Foreign Direct Investment, Infrastructure, Real GDP, Economic Growth, Ethiopia

References

[1]	Agrawal, G., & and Khan, M. A. (2011). Impact of FDI on GDP: Comparative study Chana and India. International Jounal of Business and Management, 6 (10), 71-79.
[2]	Carp, L. (2012). Analysis of the relationship between FDI and Economic Growth Literature review study. USV annals of Economics and Public Administration Volume 12, Issue 1 (15).
[3]	Damooei, J., & and Tavakoli, A. (2006). The effects of Foreign Direct Investment and Imports on Economic Growth a Comparative analysis of Thailand and Phillipians (1970-1998) (Vol. The journal of Developing Areas volume39).
[4]	Denisia, V. (2010). Foreign Direct Investment Theories; An Overviews of the main FDI Theories.
[5]	Getnet, A., & and Hirut, A. (2006). Determinants of FDI in Ethiopia, time series analys.
[6]	Li, X., & and Liu, X. (2005). Foreign Direct Investment and Economic Growth; An Increasingly Endogenous Relationship. World development 33 (3), 393-407.
[7]	Meskerem, D. M. (2014). Impact of Foreign Direct Investment on Economic Growth of Ethiopia: Time series empirical analysis, 1974-2011. Addis Ababa.
[8]	Morisset, J. P., & and Pirnia, N. (2009). How tax policyb and incentives affect on FDI a review.
[9]	Ramla, R., & and Zhang, K. (2002). Foreign Direct Investment and Economic Growth in Ethiopia.
[10]	Reiter, S., & and Kevin, S. (2010). Human Development and Foreign Direct Investment in Developing Countries: The Influence of FDI policy and Corruption. World Development 38 (12), 1678-1691.
[11]	Solomon, M. (2008). Determinants of Foreign direct Investment in Ethiopia. Mastrticht, Netherlands.
[12]	Tang, S., & S, a. S. (2008). Foreign Direct Investment and Economic Growth in China: time series analysis. United Nation University: World Institute for development Economic research.
[13]	Tibebu. T (2014), The relationship between FDI and domestic private investment over the period 1970-2012 in Ethiopia.
[14]	UNCTAD. (2015). World Investment Report 2015: Reforming International Investment Governance. New York and Geneva.
[15]	Velde, D. (2006). Foreign Direct Investment and Development: An historical perspective.
[16]	Wondoson. (2011). The impacts of FDI capital inflows on economic growt, saving and investment. Addis Ababa University, Ethiopia.

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Urgessa Firomsa Fite. (2020). Impact of Foreign Direct Investment on Economic Growth in Ethiopia. American Journal of Theoretical and Applied Business, 6(4), 72-78. https://doi.org/10.11648/j.ajtab.20200604.14

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ACS Style

Urgessa Firomsa Fite. Impact of Foreign Direct Investment on Economic Growth in Ethiopia. Am. J. Theor. Appl. Bus. 2020, 6(4), 72-78. doi: 10.11648/j.ajtab.20200604.14

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AMA Style

Urgessa Firomsa Fite. Impact of Foreign Direct Investment on Economic Growth in Ethiopia. Am J Theor Appl Bus. 2020;6(4):72-78. doi: 10.11648/j.ajtab.20200604.14

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@article{10.11648/j.ajtab.20200604.14,
  author = {Urgessa Firomsa Fite},
  title = {Impact of Foreign Direct Investment on Economic Growth in Ethiopia},
  journal = {American Journal of Theoretical and Applied Business},
  volume = {6},
  number = {4},
  pages = {72-78},
  doi = {10.11648/j.ajtab.20200604.14},
  url = {https://doi.org/10.11648/j.ajtab.20200604.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtab.20200604.14},
  abstract = {The aim of the study is to investigate the Impact of Foreign Direct Investment on economic growth in Ethiopia by using annual time series data from the periods of 1982 to 2018. To achieve this objective the Descriptive and Econometric analysis were processed. The Ordinary Least square (OLS) method approach was employed to assess the model in the long run. The empirical results points out that as foreign direct investment has a positive and significant impact on the economic growth of Ethiopia. Beside this other variables such as gross capital formation, gross domestic saving and infrastructural level also have positive and significant contribution on the economic growth and enhance the growth of the country. Error-correction model (ECM) has been used to support the existence of a stable long-term relationship and confirm a deviation from the long-term equilibrium. The finding of error-correction model revealed that there was a deviation of the actual growth of the country from its equilibrium value that eliminated every years and indicates a short run deviation of growth from the long run equilibrium. In doing so, the Diagnostic and Unit root tests were conducted to guard the model from spurious results. Based on the finding of the study the researcher recommended that all concerning bodies to be utilized properly and wisely the opportunity of foreign direct investment out comes as it continues to increase the economic growth and motivate them as they enter in to the country for investment.},
 year = {2020}
}

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TY  - JOUR
T1  - Impact of Foreign Direct Investment on Economic Growth in Ethiopia
AU  - Urgessa Firomsa Fite
Y1  - 2020/11/23
PY  - 2020
N1  - https://doi.org/10.11648/j.ajtab.20200604.14
DO  - 10.11648/j.ajtab.20200604.14
T2  - American Journal of Theoretical and Applied Business
JF  - American Journal of Theoretical and Applied Business
JO  - American Journal of Theoretical and Applied Business
SP  - 72
EP  - 78
PB  - Science Publishing Group
SN  - 2469-7842
UR  - https://doi.org/10.11648/j.ajtab.20200604.14
AB  - The aim of the study is to investigate the Impact of Foreign Direct Investment on economic growth in Ethiopia by using annual time series data from the periods of 1982 to 2018. To achieve this objective the Descriptive and Econometric analysis were processed. The Ordinary Least square (OLS) method approach was employed to assess the model in the long run. The empirical results points out that as foreign direct investment has a positive and significant impact on the economic growth of Ethiopia. Beside this other variables such as gross capital formation, gross domestic saving and infrastructural level also have positive and significant contribution on the economic growth and enhance the growth of the country. Error-correction model (ECM) has been used to support the existence of a stable long-term relationship and confirm a deviation from the long-term equilibrium. The finding of error-correction model revealed that there was a deviation of the actual growth of the country from its equilibrium value that eliminated every years and indicates a short run deviation of growth from the long run equilibrium. In doing so, the Diagnostic and Unit root tests were conducted to guard the model from spurious results. Based on the finding of the study the researcher recommended that all concerning bodies to be utilized properly and wisely the opportunity of foreign direct investment out comes as it continues to increase the economic growth and motivate them as they enter in to the country for investment.
VL  - 6
IS  - 4
ER  -

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Author Information

Urgessa Firomsa Fite

Department of Economics, College of Business and Economics, Haramaya University, Addis Ababa, Ethiopia

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APA Style

Urgessa Firomsa Fite. (2020). Impact of Foreign Direct Investment on Economic Growth in Ethiopia. American Journal of Theoretical and Applied Business, 6(4), 72-78. https://doi.org/10.11648/j.ajtab.20200604.14

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ACS Style

Urgessa Firomsa Fite. Impact of Foreign Direct Investment on Economic Growth in Ethiopia. Am. J. Theor. Appl. Bus. 2020, 6(4), 72-78. doi: 10.11648/j.ajtab.20200604.14

Copy | Download

AMA Style

Urgessa Firomsa Fite. Impact of Foreign Direct Investment on Economic Growth in Ethiopia. Am J Theor Appl Bus. 2020;6(4):72-78. doi: 10.11648/j.ajtab.20200604.14

Copy | Download

@article{10.11648/j.ajtab.20200604.14,
  author = {Urgessa Firomsa Fite},
  title = {Impact of Foreign Direct Investment on Economic Growth in Ethiopia},
  journal = {American Journal of Theoretical and Applied Business},
  volume = {6},
  number = {4},
  pages = {72-78},
  doi = {10.11648/j.ajtab.20200604.14},
  url = {https://doi.org/10.11648/j.ajtab.20200604.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtab.20200604.14},
  abstract = {The aim of the study is to investigate the Impact of Foreign Direct Investment on economic growth in Ethiopia by using annual time series data from the periods of 1982 to 2018. To achieve this objective the Descriptive and Econometric analysis were processed. The Ordinary Least square (OLS) method approach was employed to assess the model in the long run. The empirical results points out that as foreign direct investment has a positive and significant impact on the economic growth of Ethiopia. Beside this other variables such as gross capital formation, gross domestic saving and infrastructural level also have positive and significant contribution on the economic growth and enhance the growth of the country. Error-correction model (ECM) has been used to support the existence of a stable long-term relationship and confirm a deviation from the long-term equilibrium. The finding of error-correction model revealed that there was a deviation of the actual growth of the country from its equilibrium value that eliminated every years and indicates a short run deviation of growth from the long run equilibrium. In doing so, the Diagnostic and Unit root tests were conducted to guard the model from spurious results. Based on the finding of the study the researcher recommended that all concerning bodies to be utilized properly and wisely the opportunity of foreign direct investment out comes as it continues to increase the economic growth and motivate them as they enter in to the country for investment.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Impact of Foreign Direct Investment on Economic Growth in Ethiopia
AU  - Urgessa Firomsa Fite
Y1  - 2020/11/23
PY  - 2020
N1  - https://doi.org/10.11648/j.ajtab.20200604.14
DO  - 10.11648/j.ajtab.20200604.14
T2  - American Journal of Theoretical and Applied Business
JF  - American Journal of Theoretical and Applied Business
JO  - American Journal of Theoretical and Applied Business
SP  - 72
EP  - 78
PB  - Science Publishing Group
SN  - 2469-7842
UR  - https://doi.org/10.11648/j.ajtab.20200604.14
AB  - The aim of the study is to investigate the Impact of Foreign Direct Investment on economic growth in Ethiopia by using annual time series data from the periods of 1982 to 2018. To achieve this objective the Descriptive and Econometric analysis were processed. The Ordinary Least square (OLS) method approach was employed to assess the model in the long run. The empirical results points out that as foreign direct investment has a positive and significant impact on the economic growth of Ethiopia. Beside this other variables such as gross capital formation, gross domestic saving and infrastructural level also have positive and significant contribution on the economic growth and enhance the growth of the country. Error-correction model (ECM) has been used to support the existence of a stable long-term relationship and confirm a deviation from the long-term equilibrium. The finding of error-correction model revealed that there was a deviation of the actual growth of the country from its equilibrium value that eliminated every years and indicates a short run deviation of growth from the long run equilibrium. In doing so, the Diagnostic and Unit root tests were conducted to guard the model from spurious results. Based on the finding of the study the researcher recommended that all concerning bodies to be utilized properly and wisely the opportunity of foreign direct investment out comes as it continues to increase the economic growth and motivate them as they enter in to the country for investment.
VL  - 6
IS  - 4
ER  -

Copy | Download