| The main target of this study is to investigate the impact of foreign direct investment(FDI)on the employment creation and economic growth of Ethiopia from 1980 to 2019.Secondary data on dependent and independent variables were collected from World Development Indicators,United Nations Conference on Trade and Development,International Financial Statistics,and Penn World Table.An Autoregressive Distributed Lag(ARDL)approach was used to determine the relationship between FDI and other variables identified that influence employment creation and economic growth.The bound test was applied to check the long-run and short-run relationship among employment creation,economic growth,FDI,inflation,political instability,export,population,and government expenditure.When economic growth was considered as a dependent variable,the bound test confirmed the existence of cointegration.However,the bound test results did not find a cointegration when employment creation was considered the dependent variable.As a result,when economic growth is taken into account as a dependent variable,the study found a significant and negative impact of FDI on economic growth in the short and long term.On the other hand,explanatory variables like export,inflation,and government expenditure had a significant and positive impact on economic growth in the short run and the long run.However,when employment creation is considered the dependent variable,FDI positively impacts employment creation.Nevertheless,the results revealed the negative impacts of inflation,population growth,export,and political instability on employment creation during the study period.These results have substantial policy implications.The Ethiopian government should revise its policy regarding FDI to attract more FDI and address the causes of FDI’s negative impacts on economic growth.Furthermore,the government needs to invest more in infrastructure and other sectors to attract more FDI to boost economic growth and create jobs. |
PDF Full Text Request