Author : Yahya Migane Kamil 1
Date of Publication :20th May 2021
Abstract: International trade has been identified as important supplement for the economic growth; the importance of foreign direct investment have increased after trade liberalization particularly in developing countries, However, the purpose of this study is to investigate the effect of international trade and FDI on economic growth in Ethiopia over the period 1990-2019 by applying Ordinary Least Square OLS test, Johansen Cointegration test and Granger Causality test to find the relationship between variables. The results show that foreign direct investment, export and population have a positive relationship with the economic growth, whilst the import is insignificant. The study recommends that Ethiopia should promote policies that encourage and create a good macroeconomic and microeconomic environment, as well as the country, should balance the cost of policies to attract foreign direct investment over those seeking to improve local conditions including the infrastructure. Finally, import dependence ratio are not bright, so Ethiopia government should start rethinking on the promotion and the improvement of local resource by improving the export ratio in the country and policymakers should promote a strategy and policy to control the inflation level of the region by using effective monetary policy.
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