The Role of International Remittance on Economic Growth in Ethiopia

Abstract

The study was carried out to nd out the role of remittance on economic growth in Ethiopia from the period 1980 to 2016 along with other macroeconomic variables. Both descriptive statistics and time serious econometrics model were employed to analyze the data. The study employed an Autoregressive Distributed Lag (ARDL) model to co-integration in order to investigate the long and short-run relationship and Error correction model to estimate the short run e ect. The nding indicates that remittance had a negative and signi cant e ect on growth rate; however, it had a positive e ect in the short run. The analysis further revealed that openness to trade had a positive e ect in long run; however, it had a negative e ect in the short run. Contrary to this, real private investment had a positive e ect on real growth both in the long and short run. On the other hand, expenditure on human capital didn't have signi cant e ect on real growth. Therefore, in order to sustain long run growth apart from working on remittance and human capital, the government should design appropriate policies that results in the e cient use of resources contributing to economic growth through increasing the remittance ow and proper management of variables that could contribute to national output.