Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model

Ethiopia has experienced a growth acceleration over the past decade on the back of an economic strategy emphasizing public infrastructure investment and supported by heterodox macro-financial policies. To analyze the country’s growth performance du...

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Main Authors:	Moller, Lars Christian, Wacker, Konstantin M.
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	ECONOMIC BOOM FORECASTS GROWTH RATES MONETARY POLICY GOVERNMENT EXPENDITURES POLICY REFORMS ECONOMIC GROWTH NATIONAL ACCOUNTS CAPITAL ACCUMULATION LAGS REAL INTEREST RATES VALUATION STRUCTURAL CHANGE STABILIZATION POLICIES INCOME INTEREST MACROECONOMIC MANAGEMENT INVESTMENT RATE MARGINAL COST INTEREST RATE REAL GDP EXCHANGE MACROECONOMIC POLICY GDP PER CAPITA TELEPHONE COVERAGE RESOURCE ALLOCATION LIQUIDITY EXPORTS DEVELOPING COUNTRIES MARGINAL PRODUCT POLITICAL ECONOMY GROWTH MODEL PUBLIC INFRASTRUCTURE ECONOMIC POLICY DEVALUATION HIGH INFLATION VARIABLES TRADE OPENNESS BENCHMARKS INPUTS DEVELOPMENT GOALS INFLATION TRENDS ECONOMIC OUTLOOK CENTRAL BANK LENDING BANK LENDING CENTRAL BANK DEVELOPMENT INDIVIDUAL POLICIES STANDARD DEVIATION INFLUENCE EMPIRICAL RESULTS TOTAL FACTOR PRODUCTIVITY PER CAPITA INCOME EXPORT GROWTH TELECOMMUNICATIONS LOW-INCOME COUNTRIES INCOME INEQUALITY ECONOMIC DOWNTURNS RELATIVE IMPORTANCE BASE YEAR PRODUCTIVITY ECONOMETRICS INDUSTRIALIZATION MONOPOLY DEMOCRATIC INSTITUTIONS DEBT PER CAPITA GROWTH INFLATION RATE INCOME LEVELS ECONOMIC REFORMS TRADE POLICY BASKET OF GOODS NATURAL RESOURCES AVERAGING INTEREST RATE EFFECT PUBLIC INVESTMENT MACROECONOMIC STABILIZATION EXTERNAL FACTORS TAXES INFRASTRUCTURE INVESTMENT LEADING INDICATORS PRODUCTIVITY GROWTH CONSUMPTION EMPIRICAL GROWTH MODEL HUMAN CAPITAL VALUE ADDED OPPORTUNITY COST CAPITAL WAGES POPULATION SHARE INTERNATIONAL TRADE OPEN MARKET OPERATIONS ECONOMETRIC ANALYSIS MACROECONOMIC OUTCOMES FINANCIAL POLICIES EXTERNAL CONDITIONS VALUE BENCHMARKING COMPETITIVENESS CREDIT MACROECONOMICS STATE-OWNED ENTERPRISES NATIONAL INCOME FACTOR PRICES AGRICULTURE GROWTH MODELS MEASUREMENT ERROR TERM REAL EXCHANGE RATE BENCHMARK ECONOMIC THEORY GLOBAL CONDITIONS POLICY PERSPECTIVE ECONOMICS FIXED EFFECTS TRADE GDP GOODS THEORY FINANCIAL DEVELOPMENT GROWTH RATE INVESTMENT GROWTH POLICY GROWTH REGRESSIONS TOTAL FACTOR PRODUCTIVITY GROWTH CREDIT RATIONING GROWTH PERFORMANCE POVERTY GROWTH REGRESSION COUNTRY CHARACTERISTICS ECONOMIC TRENDS GINI COEFFICIENT OVERVALUATION CAPITAL ACCOUNTS POLICY RESEARCH GROWTH POLICIES HIGH GROWTH MACROECONOMIC POLICIES EXCHANGE RATE PUBLIC SPENDING OUTCOMES CONSUMPTION INCREASES DEVELOPMENT INDICATORS POSITIVE EFFECTS MIDDLE INCOME COUNTRIES PRICES LONG RUN GROWTH PROJECTIONS DEVELOPMENT POLICY HUMAN DEVELOPMENT FUTURE RESEARCH GROWTH
Online Access:	http://documents.worldbank.org/curated/en/2015/06/24596060/ethiopia’s-growth-acceleration-sustain-itinsights-cross-country-regression-model http://hdl.handle.net/10986/22164

id	okr-10986-22164
recordtype	oai_dc
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ECONOMIC BOOM FORECASTS GROWTH RATES MONETARY POLICY GOVERNMENT EXPENDITURES POLICY REFORMS ECONOMIC GROWTH NATIONAL ACCOUNTS CAPITAL ACCUMULATION LAGS REAL INTEREST RATES VALUATION STRUCTURAL CHANGE STABILIZATION POLICIES INCOME INTEREST MACROECONOMIC MANAGEMENT INVESTMENT RATE MARGINAL COST INTEREST RATE REAL GDP EXCHANGE MACROECONOMIC POLICY GDP PER CAPITA TELEPHONE COVERAGE RESOURCE ALLOCATION LIQUIDITY EXPORTS DEVELOPING COUNTRIES MARGINAL PRODUCT POLITICAL ECONOMY GROWTH MODEL PUBLIC INFRASTRUCTURE ECONOMIC POLICY DEVALUATION HIGH INFLATION VARIABLES TRADE OPENNESS BENCHMARKS INPUTS DEVELOPMENT GOALS INFLATION TRENDS ECONOMIC OUTLOOK CENTRAL BANK LENDING BANK LENDING CENTRAL BANK DEVELOPMENT INDIVIDUAL POLICIES STANDARD DEVIATION INFLUENCE EMPIRICAL RESULTS TOTAL FACTOR PRODUCTIVITY PER CAPITA INCOME EXPORT GROWTH TELECOMMUNICATIONS LOW-INCOME COUNTRIES INCOME INEQUALITY ECONOMIC DOWNTURNS RELATIVE IMPORTANCE BASE YEAR PRODUCTIVITY ECONOMETRICS INDUSTRIALIZATION MONOPOLY DEMOCRATIC INSTITUTIONS DEBT PER CAPITA GROWTH INFLATION RATE INCOME LEVELS ECONOMIC REFORMS TRADE POLICY BASKET OF GOODS NATURAL RESOURCES AVERAGING INTEREST RATE EFFECT PUBLIC INVESTMENT MACROECONOMIC STABILIZATION EXTERNAL FACTORS TAXES INFRASTRUCTURE INVESTMENT LEADING INDICATORS PRODUCTIVITY GROWTH CONSUMPTION EMPIRICAL GROWTH MODEL HUMAN CAPITAL VALUE ADDED OPPORTUNITY COST CAPITAL WAGES POPULATION SHARE INTERNATIONAL TRADE OPEN MARKET OPERATIONS ECONOMETRIC ANALYSIS MACROECONOMIC OUTCOMES FINANCIAL POLICIES EXTERNAL CONDITIONS VALUE BENCHMARKING COMPETITIVENESS CREDIT MACROECONOMICS STATE-OWNED ENTERPRISES NATIONAL INCOME FACTOR PRICES AGRICULTURE GROWTH MODELS MEASUREMENT ERROR TERM REAL EXCHANGE RATE BENCHMARK ECONOMIC THEORY GLOBAL CONDITIONS POLICY PERSPECTIVE ECONOMICS FIXED EFFECTS TRADE GDP GOODS THEORY FINANCIAL DEVELOPMENT GROWTH RATE INVESTMENT GROWTH POLICY GROWTH REGRESSIONS TOTAL FACTOR PRODUCTIVITY GROWTH CREDIT RATIONING GROWTH PERFORMANCE POVERTY GROWTH REGRESSION COUNTRY CHARACTERISTICS ECONOMIC TRENDS GINI COEFFICIENT OVERVALUATION CAPITAL ACCOUNTS POLICY RESEARCH GROWTH POLICIES HIGH GROWTH MACROECONOMIC POLICIES EXCHANGE RATE PUBLIC SPENDING OUTCOMES CONSUMPTION INCREASES DEVELOPMENT INDICATORS POSITIVE EFFECTS MIDDLE INCOME COUNTRIES PRICES LONG RUN GROWTH PROJECTIONS DEVELOPMENT POLICY HUMAN DEVELOPMENT FUTURE RESEARCH GROWTH
spellingShingle	ECONOMIC BOOM FORECASTS GROWTH RATES MONETARY POLICY GOVERNMENT EXPENDITURES POLICY REFORMS ECONOMIC GROWTH NATIONAL ACCOUNTS CAPITAL ACCUMULATION LAGS REAL INTEREST RATES VALUATION STRUCTURAL CHANGE STABILIZATION POLICIES INCOME INTEREST MACROECONOMIC MANAGEMENT INVESTMENT RATE MARGINAL COST INTEREST RATE REAL GDP EXCHANGE MACROECONOMIC POLICY GDP PER CAPITA TELEPHONE COVERAGE RESOURCE ALLOCATION LIQUIDITY EXPORTS DEVELOPING COUNTRIES MARGINAL PRODUCT POLITICAL ECONOMY GROWTH MODEL PUBLIC INFRASTRUCTURE ECONOMIC POLICY DEVALUATION HIGH INFLATION VARIABLES TRADE OPENNESS BENCHMARKS INPUTS DEVELOPMENT GOALS INFLATION TRENDS ECONOMIC OUTLOOK CENTRAL BANK LENDING BANK LENDING CENTRAL BANK DEVELOPMENT INDIVIDUAL POLICIES STANDARD DEVIATION INFLUENCE EMPIRICAL RESULTS TOTAL FACTOR PRODUCTIVITY PER CAPITA INCOME EXPORT GROWTH TELECOMMUNICATIONS LOW-INCOME COUNTRIES INCOME INEQUALITY ECONOMIC DOWNTURNS RELATIVE IMPORTANCE BASE YEAR PRODUCTIVITY ECONOMETRICS INDUSTRIALIZATION MONOPOLY DEMOCRATIC INSTITUTIONS DEBT PER CAPITA GROWTH INFLATION RATE INCOME LEVELS ECONOMIC REFORMS TRADE POLICY BASKET OF GOODS NATURAL RESOURCES AVERAGING INTEREST RATE EFFECT PUBLIC INVESTMENT MACROECONOMIC STABILIZATION EXTERNAL FACTORS TAXES INFRASTRUCTURE INVESTMENT LEADING INDICATORS PRODUCTIVITY GROWTH CONSUMPTION EMPIRICAL GROWTH MODEL HUMAN CAPITAL VALUE ADDED OPPORTUNITY COST CAPITAL WAGES POPULATION SHARE INTERNATIONAL TRADE OPEN MARKET OPERATIONS ECONOMETRIC ANALYSIS MACROECONOMIC OUTCOMES FINANCIAL POLICIES EXTERNAL CONDITIONS VALUE BENCHMARKING COMPETITIVENESS CREDIT MACROECONOMICS STATE-OWNED ENTERPRISES NATIONAL INCOME FACTOR PRICES AGRICULTURE GROWTH MODELS MEASUREMENT ERROR TERM REAL EXCHANGE RATE BENCHMARK ECONOMIC THEORY GLOBAL CONDITIONS POLICY PERSPECTIVE ECONOMICS FIXED EFFECTS TRADE GDP GOODS THEORY FINANCIAL DEVELOPMENT GROWTH RATE INVESTMENT GROWTH POLICY GROWTH REGRESSIONS TOTAL FACTOR PRODUCTIVITY GROWTH CREDIT RATIONING GROWTH PERFORMANCE POVERTY GROWTH REGRESSION COUNTRY CHARACTERISTICS ECONOMIC TRENDS GINI COEFFICIENT OVERVALUATION CAPITAL ACCOUNTS POLICY RESEARCH GROWTH POLICIES HIGH GROWTH MACROECONOMIC POLICIES EXCHANGE RATE PUBLIC SPENDING OUTCOMES CONSUMPTION INCREASES DEVELOPMENT INDICATORS POSITIVE EFFECTS MIDDLE INCOME COUNTRIES PRICES LONG RUN GROWTH PROJECTIONS DEVELOPMENT POLICY HUMAN DEVELOPMENT FUTURE RESEARCH GROWTH Moller, Lars Christian Wacker, Konstantin M. Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
geographic_facet	Africa Ethiopia
relation	Policy Research Working Paper;No. 7292
description	Ethiopia has experienced a growth acceleration over the past decade on the back of an economic strategy emphasizing public infrastructure investment and supported by heterodox macro-financial policies. To analyze the country’s growth performance during 2000–13, the paper employs a neoclassical cross-country System Generalized Method of Moments regression model. The analysis finds that accelerated growth was driven by public infrastructure investment and restrained government consumption, and supported by a conducive external environment. Macroeconomic challenges arising from declining private credit, real currency overvaluation, and relatively high inflation held back some growth. The model accurately predicts Ethiopia’s growth over the period of analysis and is robust to country-specific parameter heterogeneity and alternative infrastructure variables. Looking ahead, model simulations under alternative policy scenarios are indicative that growth may decelerate in the coming decade, making it challenging for Ethiopia to attain its middle-income country target by 2025. Although simulated growth rates do not vary much by policy scenario, the paper discusses some of the emerging risks associated with a continued reliance on the current infrastructure financing model and potential future adjustments.
format	Working Paper
author	Moller, Lars Christian Wacker, Konstantin M.
author_facet	Moller, Lars Christian Wacker, Konstantin M.
author_sort	Moller, Lars Christian
title	Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
title_short	Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
title_full	Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
title_fullStr	Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
title_full_unstemmed	Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model
title_sort	ethiopia’s growth acceleration and how to sustain it : insights from a cross-country regression model
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/06/24596060/ethiopia’s-growth-acceleration-sustain-itinsights-cross-country-regression-model http://hdl.handle.net/10986/22164
_version_	1764450326235054080
spelling	okr-10986-221642021-04-23T14:04:07Z Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model Moller, Lars Christian Wacker, Konstantin M. ECONOMIC BOOM FORECASTS GROWTH RATES MONETARY POLICY GOVERNMENT EXPENDITURES POLICY REFORMS ECONOMIC GROWTH NATIONAL ACCOUNTS CAPITAL ACCUMULATION LAGS REAL INTEREST RATES VALUATION STRUCTURAL CHANGE STABILIZATION POLICIES INCOME INTEREST MACROECONOMIC MANAGEMENT INVESTMENT RATE MARGINAL COST INTEREST RATE REAL GDP EXCHANGE MACROECONOMIC POLICY GDP PER CAPITA TELEPHONE COVERAGE RESOURCE ALLOCATION LIQUIDITY EXPORTS DEVELOPING COUNTRIES MARGINAL PRODUCT POLITICAL ECONOMY GROWTH MODEL PUBLIC INFRASTRUCTURE ECONOMIC POLICY DEVALUATION HIGH INFLATION VARIABLES TRADE OPENNESS BENCHMARKS INPUTS DEVELOPMENT GOALS INFLATION TRENDS ECONOMIC OUTLOOK CENTRAL BANK LENDING BANK LENDING CENTRAL BANK DEVELOPMENT INDIVIDUAL POLICIES STANDARD DEVIATION INFLUENCE EMPIRICAL RESULTS TOTAL FACTOR PRODUCTIVITY PER CAPITA INCOME EXPORT GROWTH TELECOMMUNICATIONS LOW-INCOME COUNTRIES INCOME INEQUALITY ECONOMIC DOWNTURNS RELATIVE IMPORTANCE BASE YEAR PRODUCTIVITY ECONOMETRICS INDUSTRIALIZATION MONOPOLY DEMOCRATIC INSTITUTIONS DEBT PER CAPITA GROWTH INFLATION RATE INCOME LEVELS ECONOMIC REFORMS TRADE POLICY BASKET OF GOODS NATURAL RESOURCES AVERAGING INTEREST RATE EFFECT PUBLIC INVESTMENT MACROECONOMIC STABILIZATION EXTERNAL FACTORS TAXES INFRASTRUCTURE INVESTMENT LEADING INDICATORS PRODUCTIVITY GROWTH CONSUMPTION EMPIRICAL GROWTH MODEL HUMAN CAPITAL VALUE ADDED OPPORTUNITY COST CAPITAL WAGES POPULATION SHARE INTERNATIONAL TRADE OPEN MARKET OPERATIONS ECONOMETRIC ANALYSIS MACROECONOMIC OUTCOMES FINANCIAL POLICIES EXTERNAL CONDITIONS VALUE BENCHMARKING COMPETITIVENESS CREDIT MACROECONOMICS STATE-OWNED ENTERPRISES NATIONAL INCOME FACTOR PRICES AGRICULTURE GROWTH MODELS MEASUREMENT ERROR TERM REAL EXCHANGE RATE BENCHMARK ECONOMIC THEORY GLOBAL CONDITIONS POLICY PERSPECTIVE ECONOMICS FIXED EFFECTS TRADE GDP GOODS THEORY FINANCIAL DEVELOPMENT GROWTH RATE INVESTMENT GROWTH POLICY GROWTH REGRESSIONS TOTAL FACTOR PRODUCTIVITY GROWTH CREDIT RATIONING GROWTH PERFORMANCE POVERTY GROWTH REGRESSION COUNTRY CHARACTERISTICS ECONOMIC TRENDS GINI COEFFICIENT OVERVALUATION CAPITAL ACCOUNTS POLICY RESEARCH GROWTH POLICIES HIGH GROWTH MACROECONOMIC POLICIES EXCHANGE RATE PUBLIC SPENDING OUTCOMES CONSUMPTION INCREASES DEVELOPMENT INDICATORS POSITIVE EFFECTS MIDDLE INCOME COUNTRIES PRICES LONG RUN GROWTH PROJECTIONS DEVELOPMENT POLICY HUMAN DEVELOPMENT FUTURE RESEARCH GROWTH Ethiopia has experienced a growth acceleration over the past decade on the back of an economic strategy emphasizing public infrastructure investment and supported by heterodox macro-financial policies. To analyze the country’s growth performance during 2000–13, the paper employs a neoclassical cross-country System Generalized Method of Moments regression model. The analysis finds that accelerated growth was driven by public infrastructure investment and restrained government consumption, and supported by a conducive external environment. Macroeconomic challenges arising from declining private credit, real currency overvaluation, and relatively high inflation held back some growth. The model accurately predicts Ethiopia’s growth over the period of analysis and is robust to country-specific parameter heterogeneity and alternative infrastructure variables. Looking ahead, model simulations under alternative policy scenarios are indicative that growth may decelerate in the coming decade, making it challenging for Ethiopia to attain its middle-income country target by 2025. Although simulated growth rates do not vary much by policy scenario, the paper discusses some of the emerging risks associated with a continued reliance on the current infrastructure financing model and potential future adjustments. 2015-07-14T22:18:53Z 2015-07-14T22:18:53Z 2015-06 Working Paper http://documents.worldbank.org/curated/en/2015/06/24596060/ethiopia’s-growth-acceleration-sustain-itinsights-cross-country-regression-model http://hdl.handle.net/10986/22164 English en_US Policy Research Working Paper;No. 7292 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Africa Ethiopia

Ethiopia’s Growth Acceleration and How to Sustain It : Insights from a Cross-Country Regression Model

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