Finance and Economic Development Post Cold War

This chapter examined the effect of finance in the development of the Ethiopian economy post-Cold War. The result of the autoregressive distributed lag (ARDL) estimates shows that human development is positive and statistically significant both in the short-run and in the long-run while GDPPC, real interest rate, GDPPC, and exchange rates had significant but negative impacts on the Ethiopian economy. Finally, the result also shows that the gross fixed capital formation (GFCF) is statistically significant but negative in the short-run and positive in the long-run. The study therefore recommended that real interest rate in Ethiopia should be stabilized by the monetary authority in order to enhance private investment and by extension improve the GDPPC. Ethiopian authorities should improve on the capital accumulation to enhance total factor productivity.