Abstract
This study examines the effects of fiscal policy—particularly government expenditure and taxation—on economic growth in Ethiopia using the ARDL modeling approach. It finds that both in the short and long run, the effect of better human capital formation, increased availability of the economy’s capital stock and labor force had a significant positive effect on the growth of the economy. On the fiscal side, a good performance in the collection of indirect tax revenue and increased productive government consumption had a significant positive effect on the growth of the economy both in the short and long run.
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Notes
- 1.
There is no data for private investments from 25 years ago or before the current regime. Hence, private investments are excluded and only government investments are included in our model.
- 2.
Aid has been included as a control variable but was found to be statically insignificant and is not revealed in the estimated output.
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Gebreegziabher, S. (2018). Effects of Tax and Government Expenditure on Economic Growth in Ethiopia. In: Heshmati, A., Yoon, H. (eds) Economic Growth and Development in Ethiopia. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Singapore. https://doi.org/10.1007/978-981-10-8126-2_5
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