An Economic Analysis of the Impact of Globalization on Ethiopian Economy: An Application of Error Correction Model

Abstract

Nowadays the issue of globalization has received huge attention  from researchers in different areas for the fact that we always hear about it but there exists little evidences of convergences. While some researchers argue pro globalization others pointed out the costs of globalization being outweighs its benefits and it fails to meet its potentials of benefiting both developing and developed world. This study has attempted to investigate the economic impact of globalization on Ethiopia using the annual data covering from 1991 to 2016 and by employing a co-integration analysis.The empirical result revealed that economic growth of Ethiopia is being affected by globalization both in the short-run and long-run. Thus economic growth and globalization have a long-run relationship which is found to be both positive and significant. Therefore, Ethiopia can be benefited more provided that if the economy of country is integrated and opened to competitions from the rest of the world.

Keywords: Co-Integration Analysis, ECM, Economic Growth, Ethiopia, FDI, Globalization, Trade Openness