Impact of Foreign Direct Investment on Export Performance: The Case of Ethiopia

  • Wengelawit Kebede Tessema

Student thesis: Master's ThesisMaster of Arts (MA)

Abstract

This study explores the impact of Foreign Direct Investments (FDI) on Ethiopia's export performance. The topic is motivated by the huge investment Government of Ethiopia is making to attract FDI and its optimistic view regarding the role of FDI in boosting export performance. The vector autoregressive model (VAR) has been adopted to estimate the long run causal relationship among exports, foreign direct investment and GDP. Results for the cointegration test show that there exists a long run equilibrium relationship among exports, FDI and GDP. The estimated Error Correction Model finds FDI negatively affecting exports with a two-year gap. Our findings suggest that Ethiopia may not be fully reaping the benefits of FDI, nor exploiting FDl's complementarity with domestic investments. The study suggests improvements of structural issues, as well as fixing the long and inefficient bureaucracy in supporting new investments with the set-up, production and exports. Investment in human capital development and reducing the anti-export bias are also suggested. As this study suffered from a lack of long term manufacturing-specific data, it recommends further studies to determine the direct impact of FDI and its spillover effects using additional years of complete dataset.
Date of Award2019
Original languageAmerican English
Awarding Institution
  • Eastern Illinois University
SupervisorMukti P Upadhyay (Supervisor)

ASJC Scopus Subject Areas

  • Economics and Econometrics

Cite this

'