Explaining macroeconomic fluctuations in Ethiopia: the role of monetary and fiscal policies

Hawitibo, Alemu Lambamo

doi:10.1007/s10644-022-09459-4

Cited by 3 publications

(2 citation statements)

References 38 publications

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“…These investments can enhance productivity by improving the efficiency of production processes. Higher productivity means that more output can be produced using the same amount of resources, leading to an increase in real GDP (Duskobilov, 2017;Froyen & Guender, 2019;Hawitibo, 2023).…”

Section: Short Run Error Correction Model (Ecm)mentioning

confidence: 99%

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Effect of Monetary Policy on the Economic Growth of Ethiopia: An Autoregressive Distributed Lag (ARDL) Approach

Abdulkadr,

Asnakew,

Sendkie

et al. 2024

Preprint

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This study analyze the effect of monetary policy. To address this objective this study employed ARDL and error correction model (ECM) based on annual data from 1993 to 2022. Granger causality test was also employed to check the direction of causal effects of one variable on the other variable. All required pre and post estimation test were performed and verified that the model was statistical viable. The study revealed that, In short run, deposit interest rate, reserve required amount and open market operation have positive and statistically significant effects on real GDP growth of Ethiopia, however, money supply have negative and statistically significant effects on real GDP growth of Ethiopia. In long run, money supply have positive and statistically significant effects on real GDP growth of Ethiopia, however, deposit interest rate and reserve required have negative and statistically significant effects on real GDP growth of Ethiopia. To sum up, in short run contractionary monetary policy was promising and in long run expansionary monetary policy was favorable effect on economic growth. The Granger causality test result shows that there is bidirectional causality between monetary policy and economic growth; except there was unidirectional relationship between deposit interest rate and economic growth. Ultimately, this research suggests the following policy recommendation: for short-term economic enhancement, it is advisable for the government to opt for a contractionary monetary policy rather than an expansionary one. On the other hand, for long-term economic improvement, an expansionary monetary policy is more favorable than a contractionary one.

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Section: Short Run Error Correction Model (Ecm)mentioning

confidence: 99%

“…These adverse conditions can fuel discontent among citizens, leading to protests, strikes, or even political upheaval. Political instability further hampers economic growth prospects as it creates an uncertain business environment and deters investment (Hawitibo, 2023).…”

Section: Introductionmentioning

confidence: 99%

Effect of Monetary Policy on the Economic Growth of Ethiopia: An Autoregressive Distributed Lag (ARDL) Approach

Abdulkadr,

Asnakew,

Sendkie

et al. 2024

Preprint

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Sources of macroeconomic fluctuations in Tunisia: a structural VAR approach

Trabelsi

2024

SN Bus Econ

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Analyzing the dynamics of monetary policy and economic growth in Ethiopia: an autoregressive distributed lag (ARDL) approach

Abdulkadr,

Asnakew,

Sendkie

et al. 2024

Discov Sustain

View full text Add to dashboard Cite

Numerous studies conducted by various scholars have aimed to ascertain the impact of monetary policy on economic growth. However, these empirical investigations have not reached a unanimous consensus. Therefore, this study analyzes the effect of monetary policy. To address this objective, this study employed ARDL and error correction model (ECM) based on annual data from 1993 to 2022. Granger causality test was also employed to check the direction of causal effects of one variable on the other variable. All required pre and post estimation tests were performed and verified that the model was statistically viable. The study revealed that, in the short run, deposit interest rate, reserve required amount, and open market operation have positive and statistically significant effects on real GDP growth of Ethiopia; however, money supply has negative and statistically significant effects on real GDP growth of Ethiopia. In the long run, money supply has positive and statistically significant effects on real GDP growth of Ethiopia; however, deposit interest rate and reserve required have negative and statistically significant effects on real GDP growth of Ethiopia. To sum up, in the short run, contractionary monetary policy was promising, and in the long run, expansionary monetary policy was favorable for economic growth. The Granger causality test result shows that there is bidirectional causality between monetary policy and economic growth; except there was a unidirectional relationship between deposit interest rate and economic growth. Ultimately, this research suggests the following policy recommendation: for short-term economic enhancement, it is advisable for the government to opt for a contractionary monetary policy rather than an expansionary one. On the other hand, for long-term economic improvement, an expansionary monetary policy is more favorable than a contractionary one.

show abstract

Explaining macroeconomic fluctuations in Ethiopia: the role of monetary and fiscal policies

Cited by 3 publications

References 38 publications

Effect of Monetary Policy on the Economic Growth of Ethiopia: An Autoregressive Distributed Lag (ARDL) Approach

Effect of Monetary Policy on the Economic Growth of Ethiopia: An Autoregressive Distributed Lag (ARDL) Approach

Sources of macroeconomic fluctuations in Tunisia: a structural VAR approach

Analyzing the dynamics of monetary policy and economic growth in Ethiopia: an autoregressive distributed lag (ARDL) approach

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