Determinants of Economic Growth of Ethiopia: An Analysis for the Post Ethiopia-Eretria War (1998-2000)

The purpose of this paper is to investigate what major macroeconomic variables contributed for the economic growth of Ethiopia after the Ethiopia-Eritrea war of 1998-2000. This study applies ordinary least square on time series data pertaining to core macroeconomics variables, collected from the database of World Bank and IMF. Empirical results reveal that Ethiopia has experienced economic boom after the Ethiopia-Eritrea war of 1998-2000 with its strategy of curtailing government expenditure and expanding public investment on mega projects. The study also identified that the “peace dividends” found to be well placed and is paying back positively. Ethiopia witnessed transition towards emerging economy in Sub-Saharan African country, assessing the economic growth and the factors that interplay behind the growth may give helpful lesson for similar economies and the region. In contrast with other existing economic booms, Ethiopia’s growth acceleration has not achieved much attention in the literature. This study fills the gap by methodically identifying and assessing the major economic driving forces after the Ethiopia-Eritrea war of 1998-2000. The time period indicates crucial detours of how the country initiated and maintained the economic boom.