Abstract:
This study examines the determinants of budget expenditure in Ethiopia using annual data for the
period from 1990 to 2021; and provides an overview of the Ethiopia budget expenditure. The
Johansen-Juselius co-integration test established that there is a long-run relationship between
budget expenditure and its determinants. The Vector error correction model was used to examine
the key determinants. The results of this study from VECM show that FDI, Debt, Inflation rate,
Money supply, GDP and Aid are variables significantly influencing the size of budget expenditure
with the lag value. There is both short-run and Long-run relationship between these variables and
Expenditure level. The Aid and FDI are resulted negative effects on Expenditure and Inflation rate
, National income (GDP), Money supply and Debt are statistically significant variables at 1% and
positively affecting expenditure level.
From the result of the study, the researcher recommends concerned body to react on significant
variables having positive and negative relationship with expenditure level.
