Modeling the Determinats of Domestic Private Investments in Ethiopia

The study examined the determinants of domestic private investment in Ethiopia using a time series data over the period 1992-2010. The study employed an Autoregressive Distributed Lag (ARDL) model and applied the bounds test approach in modeling the long run determinants of domestic private investment. The study found exchange rate, domestic saving and domestic credit as key factors having negative and significant impact on domestic private investment. External debt and government expenditure are found to have significant and positive effect on domestic private investment. The results imply that government expenditure stimulates domestic private investment while domestic credit and domestic saving have a constrained effect on the sector.