The Nexus Between Devaluation, External Debt, And Economic Growth In Ethiopia

Tesfahun Ayanaw

dc.contributor.author	Tesfahun Ayanaw
dc.date.accessioned	2020-10-19T07:53:50Z
dc.date.available	2020-10-19T07:53:50Z
dc.date.issued	2020-10
dc.identifier.uri	http://hdl.handle.net/123456789/11421
dc.description.abstract	In developing countries, currency devaluation and external debt are important options to promote economic growth described by International Monetary Fund. However, these policy packages were not effective in many developing countries. Thus, cognizant of this fact, this study examined the nexus between devaluation, external debt and economic growth. In this study, Vector autoregressive (VAR) and Vector Error Correction Model (VECM) were employed. The VAR was analyzed through impulse response function and forecast error variance decomposition. The impulse response function and variance decomposition are used and estimated based on annual data from NBE, MOFED, and EEA during 1991-2018. The study found that in the long run, devaluation had expansionary effect on output but output increases at decreasing rate. In addition, devaluation increased external debt at decreasing rate in the long run. Moreover, in the long run, the variation of external debt resulted from variation of exchange rate and variation of real GDP; and the variation of real GDP is resulted from variation of exchange rate in the long run by using forecast error variance estimation. In general, the study showed that there is long run relationship between devaluation, external debt and output in Ethiopia. Lastly, the study recommended that devaluation is the last option to promote economic growth of Ethiopia so that the government should give attention to import substitution strategy, good business environment, access to infrastructure; political stability and focus on the efficiency of exports are alternative policies to devaluation. Besides, the government should give attention to spending on education and private investment relative to devaluation and external debt policies.	en_US
dc.language.iso	en	en_US
dc.subject	ECONOMICS	en_US
dc.title	The Nexus Between Devaluation, External Debt, And Economic Growth In Ethiopia	en_US
dc.type	Thesis	en_US