Abstract:
Despite Ethiopia’s strategic emphasis on industrialization as a means of economic transformation, the contribution of the industrial manufacturing sector to GDP has remained limited. This study addresses the lack of empirical evidence on how key macroeconomic variables namely investment, population, education level, and inflation affect GDP, with a specific focus on the role of the industrial manufacturing sector. The research employed a quantitative approach using annual time-series data from 1990 to 2023. Data were collected from credible secondary sources, including the National Bank of Ethiopia, the Central Statistical Agency, and the World Bank Development Indicators. The study applied the Autoregressive Distributed Lag (ARDL) bounds testing approach to examine both short-run dynamics and long-run relationships among the variables. Unit root tests were conducted to determine the order of integration, and diagnostic tests ensured model reliability. The ARDL model results revealed that industrial manufacturing, investment, and education have a statistically significant and positive long-run impact on GDP, while inflation negatively affects economic growth. In the short run, education and inflation were found to be significant, while population and investment were not. The error correction term was negative and statistically significant, indicating a stable long-run equilibrium and confirming that short-run deviations adjust over time. Based on these findings, the study recommends that the Ethiopian government strengthen investment in education and manufacturing infrastructure, implement sound inflation control policies, and adopt evidence-based industrial strategies to enhance the sector’s contribution to sustainable economic growth
