The Effect of Banking Sector Development on Economic Growth. Empirical Analysis from Ethiopian Economy Final
The Effect of Banking Sector Development on Economic Growth. Empirical Analysis from Ethiopian Economy Final

Author: Zelalem Birhan

Publisher: GRIN Verlag

Published: 2023-11-16

Total Pages: 85

ISBN-13: 3346970485

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Master's Thesis from the year 2020 in the subject Economics - Economic Cycle and Growth, grade: 3.33, Ethiopian Civil Service University, language: English, abstract: This paper examined the relationship between banking sector development and economic growth in Ethiopia. The paper also examines the effect of banking development on economic growth in Ethiopia and to establish which theory holds for Ethiopia between the demand-following and the supply-leading theory. Unlike the majority of previous studies, this study uses the newly developed ARDL-bounds testing approach to examine the relationship. The ARDL-bounds testing approach has numerous advantages over other co-integration techniques, especially when a short time-series dataset is used. In order to test the robustness of the empirical results, three proxies of bank-based financial development have been used; namely: 1) the domestic credit provided by the banking sector as a ratio of GDP, 2) broad money supply as a ratio of GD, 3) private credit as percentage of GDP. Annual time series data between the years 1987 and 2019 were used for the study, from the National Bank of Ethiopia (NBE) statistical bulletin. The structural break unit root test revealed that all the variables are stationary at their first difference; the bound test cointegration analysis established the existence of long run relationship among the variables. The ARDL revealed that domestic credit provided by the banking sector significantly affected economic growth in the long run, while private credit statistical significant and negatively affect economic growth in the short run during the period of study. The empirical results of this study show that the effect of banking sector development and economic growth in Ethiopia is sensitive to the proxy used to measure the banking sector development. The policymakers need to make policies that can lead to establishment of banking institutions in the rural areas which have limited access to banking services and create enabling legal environment for efficient allocation of credit to the private sector at the same time the supervisory organ shall establish conducive environment for banking institution which are engaging in loan granting for diversified economic sectors for private investment.

Ethiopia Financial Sector Development
Ethiopia Financial Sector Development

Author: Weltbank

Publisher:

Published: 2019

Total Pages:

ISBN-13:

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Ethiopia's financial sector has, over the past decade, been operating under a financial repression framework used by the government for managing its monetary and foreign exchange policy, and financing of large infrastructure projects and state-owned-enterprises (SOEs). Instruments used under this framework include the central bank financing of the government, a state-dominated banking sector, mandatory financing of priority projects and directed credit, administered interest rates, a captive domestic market for government debt, high liquidity and capital requirements, and strict foreign exchange controls. Over time, the framework has led to the build-up of large macro-financial imbalances; these include a system of fiscal dominance, pressures on inflation, the overvaluation of the Birr, a chronic shortage of foreign exchange, the lack of development of the financial system, a credit allocation skewed toward the public sector, and an overall risk of malinvestment. This report was prepared as part of a technical assistance engagement and was based on a request from the National Bank of Ethiopia (NBE) as an input to support their development of a financial sector modernization roadmap to meet the overall government reform plans. The report provides an insight on operations and challenges in Ethiopia's financial sector and proposes a framework to help open and transform the current system to meet the country's future market-oriented growth plan. The report is organized along the NBE Roadmap framework which is aligned across three pillars: (i) financial stability and safety net; (ii) long-term finance and financial markets; and (iii) access to finance and financial inclusion. Opening of the financial sector constitutes a cross-cutting theme.

The Effect of Financial Liberalization on Economic Development in Ethiopia
The Effect of Financial Liberalization on Economic Development in Ethiopia

Author: Omer Mohammed

Publisher: GRIN Verlag

Published: 2017-10-11

Total Pages: 177

ISBN-13: 3668546789

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Master's Thesis from the year 2016 in the subject Economics - Finance, grade: 2, Addis Ababa University (College of Bussiness and Economics), course: Accounting and Finance, language: English, abstract: This study aims to empirically examine the impact of financial liberalization on economic development in Ethiopia over the period of 1984-2014. In doing so, the ARDL approach to Co-integration and Error Correction Model were employed to investigate the long run and short run relationships. Accordingly, the empirical results obtained from the study indicate that financial widening has contributed significantly to the increase in saving and the level of economic growth. Even though, the total deposit happens to generate more investment; there is shortage of supply of credit. In addition, the study indicates financial widening and credit to the private sector exhibited a significant positive association with financial development while total banks credit bearing a significant impact on industrial development. However, the overall financial reform showed insignificant association both with economic growth and industrial development. The efficiency in allocating financial resources show significant positive association with share of banks credit to the private sector, however, the overall financial reform has positive insignificant impact on efficiency of resource allocation. The contribution of financial sector after the deregulation has a mixed result on welfare. In terms of catalyzing employment opportunity, financial widening and the overall liberalization policy measure have played a positive role while the financial development has no significant impact on employment creation. Financial widening has significant positive impact on poverty alleviation while the overall policy measure has insignificant impact on the impoverished. Consequently, the result of the study indicate the overall financial liberalization measure actually decrease the likelihood of financial instability and indicates the direction of causality going from economic growth to financial development proving the demand leading hypothesis, which in turn portrays the heavy involvement of government in the financial sector.

Domestic Resource Mobilization and Financial Development
Domestic Resource Mobilization and Financial Development

Author: G. Mavrotas

Publisher: Springer

Published: 2008-03-27

Total Pages: 306

ISBN-13: 0230594018

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This book provides insights into the evolving debate regarding the mobilization of domestic resources and the crucial role that financial development can and should play in this regard, exploring aspects of the financial development–domestic resource mobilization nexus, including country case studies.

The Federal Democratic Republic of Ethiopia
The Federal Democratic Republic of Ethiopia

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2006-05-05

Total Pages: 66

ISBN-13: 1451812779

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This Selected Issues paper on The Federal Democratic Republic of Ethiopia highlights that accelerating private sector development is the key to increasing and sustaining growth, and providing employment opportunities to raise incomes. Private sector development remains in its infancy, reflecting the slow transition to a market economy, and the contribution of industry to GDP has not changed significantly. The World Bank has identified some key areas to improve the investment climate, which include deeper financial sector reform and acceleration of the privatization program.

Achieving Financial Stability and Growth in Africa
Achieving Financial Stability and Growth in Africa

Author: Stephany Griffith-Jones

Publisher: Routledge

Published: 2016-03-24

Total Pages: 203

ISBN-13: 1317301692

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This book explores how the financial system should be regulated and structured to achieve the twin goals of inclusive growth and financial stability, with a focus on African low-income countries (LICs). The subject and content of this book is original in that it attempts to draw on the lessons and radical rethinking on the financial sector in developed and middle income countries, arising in the wake of the international financial crisis. It includes four in- depth country case studies, of Kenya, Ghana, Nigeria and Ethiopia, but also analyses the empirical evidence for Sub-Saharan Africa as a whole, evaluating the relevance (or not) of such major changes for the very different financial sectors and economies in low income countries. Achieving Financial Stability and Growth in Africa has major academic and policy implications, especially for low income countries, but also more generally, on broader issues. These include the desirable size of the financial sector, as well as more specific issues, such as the high cost of borrowing of small and medium enterprises in LICs, and possible measures to reduce it. Highly topical subjects like the appropriate regulation of the financial sector and management of capital flows are discussed in depth. Though drawing on comprehensive reviews of the literature, this volume has the virtue of the large comparative academic and policy experience of researchers, as well as in-depth case studies, that take account of institutional and economic features of low- income countries. Written by senior academics and policy-makers, this book is a must read for those researching or participating in the financial sectors of low-income countries, as well as in developed economies. It is also suitable for those who study political economy and public finance.

Ethiopia
Ethiopia

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 1999-09-14

Total Pages: 99

ISBN-13: 1451812620

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This paper reviews economic developments in Ethiopia during 1995–99. It provides an update on macroeconomic performance and structural reforms during FY96–FY99 (fiscal year ended July 7), when Ethiopia—as Africa’s second most populous country and one of the world’s poorest nations—continued to make strides in transitioning to a market-based economy and alleviating widespread poverty. The paper also highlights the major challenges in the areas of financial sector liberalization, civil service reform, and privatization.