Financial Repression - Economic Growth Nexus in Ethiopia: Evidence from Multivariate Analysis

Abstract

This paper examines empirically the short run and long run relationships and the causality between financial repression proxies and economic growth, utilizing time series data over the period 1980 to 2015 in Ethiopia. Bound test of co integration and estimation of short run and long run relationships, based on ARDL model frame work and Toda Yammato causality test based on VAR model were employed.The ARDL bound test suggests that there is a long run relationship between financial repression proxies and economic growth. The long run estimates also suggest that there is a positive significant effect of financial repression proxies on economic growth. While in a short run there is statistically negative significant effect of financial repression proxies on economic growth but the magnitude is lower. Unidirectional and bi-directional causalities also found from financial repression proxies to economic growth.

Keywords: Financial repression, economic growth, ARDL, Ethiopia