The Impact of Macroeconomic Variables on the Profitability of Commercial Banks In Ethiopia

Yohannes Wasie

dc.contributor.author	Yohannes Wasie
dc.date.accessioned	2020-09-23T07:10:45Z
dc.date.available	2020-09-23T07:10:45Z
dc.date.issued	2020-09
dc.identifier.uri	http://hdl.handle.net/123456789/11238
dc.description.abstract	Based on the vital contribution of commercial banks to economic progress of Ethiopia, this study examined the impact of macroeconomic variables on the profitability of commercial banks in Ethiopia over the periods 2009/10 to 2018/19 by using panel data of thirteen sampled commercial banks out of eighteen banks operated in Ethiopia. To comply with the objective of the research, the paper used quantitative research approach. An explanatory research design was employed to check the impact of GDP growth rate, inflation rate, interest rate, exchange rate, unemployment rate, government external debt and foreign aid on banks' profitability ratios in 3 separate models. Return on assets (ROA), return on equity (ROE) and net interest margin (NIM) were used as proxy of bank profitability ratio. The random effect regression output revealed that real GDP growth rate; unemployment rate and government external debt were found positive and significantly related to bank’s ROA, whereas the inflation rate influenced ROA negatively. The result also revealed that inflation rate, exchange rate and unemployment rate were positive and significantly affected bank’s ROE, whereas interest rate and foreign aid have a negative and significant impact on bank’s ROE. The last regression result also revealed that inflation rate and exchange rate have a negative impact on bank’s NIM, whereas foreign aid has a positive impact on bank’s NIM. Accordingly, the study recommends that banks should make policies to efficiently utilize the fruits of economic booms. Furthermore, banks should shield themselves against inflation-related risks and try to match their increasing operating expenses with revenue growth. Finally, with the inclusion of more variables like racism, political affairs, foreign direct investment, trade balance, and other internal factors may be used as a potential extension of this research.	en_US
dc.language.iso	en	en_US
dc.subject	ACCOUNTING AND FINANCE	en_US
dc.title	The Impact of Macroeconomic Variables on the Profitability of Commercial Banks In Ethiopia	en_US
dc.type	Thesis	en_US