THE NEXUSES BETWEEN INVESTMENT, TRADEOPENNESS AND ECONOMIC GROWTH IN ETHIOPIA: A TIME SERIES ANALYSIS

Abstract

This paper examines the nexus between investment, trade openness and economic growth in Ethiopia. At nationwide level the achievement of sustainable rapid economic growth along with increasing amount of investment with optimal international trade is the central policy objective of most countries. The objectives of this study are to investigate the interrelations among investment, trade openness and economic growth. The study uses a combination of descriptive statistics and time serious econometric models using secondary data source obtained from NBE and MOFED in period 1980-2018. The result to the study has revealed there is no causal relationship between trade openness and GDP but investment shows a positive impact on economic growth. The relation between investment and trade openness appears to be complementary. Therefore the recommendations of this study are that the central government should encourage domestic and foreign investment and that the Ethiopian government should place high emphasis on the investment sector. Accelerating trade is also essential due to its positive impacts on investment