The Effect of Foreign Direct Investment on Ethiopian Economic Growth

Abstract

The main objective of the study is to determine the effect of foreign direct investment on economic growth of Ethiopia. In line with the general objective the researchers analysed the effect of major federal government spending on healthcare, education, interest payments on general debt and expenditure on military of the country on GDP growth rate. The researchers found the data mainly from World Bank development indicators. After getting the data from1990 to 2020 of 31years data, we used multiple linear regression analysis by running STATA V15 to show the effect of all the above listed independent macro variables on GDP growth of the country, as GDP a measurement of economic growth and dependent variable of the study. After analysing the outputs of STATA the basic assumptions of classical linear regression analysis were conducted and checked. After all, the researchers found that an adjusted R2 of76.855% which implies that, the independent variables used in this study explains 76.855% of the dependent variables under study. From all the independent variables, FDI net inflows, expenditure on healthcare and expenditure for education have been found as a positive contributor of GDP growth rate and expenditure on interest is found as a negative factor for GDP growth rate. Based on the findings of the study, the researchers forwarded basic suggestions for the concerned boy.