The Impact of Illicit Financial Flow on Economic Growth of Ethiopia A Time Series Empirical Analysis, 2000-2015

Abstract

The objective of this study was to investigate the impact of illicit financial flow on economic growth of Ethiopia. The study used secondary data, particularly from 2000 to 2015 years. The study used varies internationally recognized estimation models (Hot money narrow and Trade miss-invoicing) to get the magnitude of illicit financial flow in Ethiopia. Moreover, it employed ECM (error correction model /mechanism) to get a short and long run velocity and magnitudenal effect of IFF on GDP. The study found that IFF has Significant and negative impact on Gross domestic product. Based on research findings, establishing controlling and auditing mechanisms for trans-boundary trade activities, creating effective institution and building collaborative approach are recommended to curve down the magnitude of IFF and its impact on economic growth.