Determinants Of Private Investment In Ethiopia

Abstract

Private investment is a powerful tool for maintaining and expanding the capital formation and production capacity of an economy. Hence this study was conducted with the main objective of identifying and analyzing factors that determine private investment in Ethiopia. The study utilized 21-years secondary data (i.e. from 2000 to 2020) from various national and international institutions. Then, OLS regression model was used after the data sets were transformed to natural log form. The regression results show that public investment, real GDP, external debt service, and access to bank credit have significant positive effect on private investment while lending interest rate and foreign direct investment have significant negative effect on performance of private investment under the study period. Hence, to promote the performance of private sector in the country Casualty test is undertaken to check direction of effect in between dependent and independent variables. It is essential to see causality effect and take measures that can improve real income of people and make public investment and institutions that are crucial to attract private investment. Besides, strengthen financial institutions to provide sufficient financial resource to private investors