SAVING - INVESTMENT AND ECONOMIC GROWTH NEXUS IN ETHIOPIA FROM 1974 TO 2017: A MULTIVARIATE TIME SERIES  ANALYSIS

YIBELTAL, MESLIE

dc.contributor.author	YIBELTAL, MESLIE
dc.date.accessioned	2019-09-26T02:51:41Z
dc.date.available	2019-09-26T02:51:41Z
dc.date.issued	2019-09-26
dc.identifier.uri	http://hdl.handle.net/123456789/9766
dc.description.abstract	Abstract Background: Saving and investment has been regarded as the two prominent variables in achieving sustainable economic growth. In one country’s economic progress saving and investment play a crucial role. Thereby, this study aimed to examine the saving, investment and economic growth nexus in Ethiopia using the annual time series data observed from 1974 to 2017. Principally, the study planned to investigate the causal linkage and the impact of the saving-investment relationship on economic growth rate in Ethiopia. Method: To achieve the underlying objectives, the study employed vector autoregressive and error correction models as well as cointegration analysis using the Johansen multivariate procedure. Pairwise Granger causality, impulse response functions and forecast error variance decompositions were also used. Results: The Augmented Dickey Fuller and Phillips Perrron unit root test indicated that all series are integrated of order one, i(1). That is, all series are stationary after first difference. The Johansen cointegration test revealed the existence of a long-run relationship among saving, investment and economic growth with one cointegrating equation. The causality result showed economic growth granger causes saving. It was also found bidirectional causality between saving and investment as well as investment (GCF) and economic growth rate. VAR (1) model result showed economic growth rate is significantly explained by one period lagged values of itself, saving and investment. Furthermore, the result indicated investment (GCF) is affected by economic growth rate and amount of saving in Ethiopia. For a 1% increase in gross domestic saving and gross capital formation leads to the economic growth rate increased by 2.845% and 4.768% in natural logarithm respectively in the long run on average, ceteris paribus. In addition, 52.6% of long run economic growth departure is adjusted (back to) equilibrium within each year. Conclusion: From the long run model saving and investment have a positive significant effect on the economic growth rate of Ethiopia both in the short run and long run. Based on the results obtained it is recommended that the government and stakeholder work together to create investment opportunity and initiate investors to raise saving and economic growth. Key Words: Cointegration, Economic growth, Granger Causality, Vector Autoregression (VAR), Vector Error Correction Model (VECM), and Forecasting.	en_US
dc.language.iso	en_US	en_US
dc.subject	Statistics	en_US
dc.title	SAVING - INVESTMENT AND ECONOMIC GROWTH NEXUS IN ETHIOPIA FROM 1974 TO 2017: A MULTIVARIATE TIME SERIES ANALYSIS	en_US
dc.type	Thesis	en_US