Impact of Broad Money Supply on Economic Growth of Ethiopia

Abstract

This study is targeted to examine the impact of money supply on Real GDP of Ethiopia. The data used for this study was a time serious (2002-2017) data obtained from national bank of Ethiopia Annual report. The data is analyzed using Vector Autoregressive model and causality test to check the short causality between broad money supply and Real GDP growth in Ethiopia and the result of both tests revealed that broader money supply has positive significant effect on real GDP and statically significant at 5 percent level. However, Johansen co-integration test result shows that there is no long run association ship running from broader money supply to real GDP.The policy implication was that any short run fluctuation in country’s broad money supply level by monetary policy officials will bring a significant positive impact on Real GDP in the short run .

Keywords: Broader money supply, Real GDP Impact, Vector Auto Regressive model

DOI: 10.7176/RJFA/12-5-01

Publication date:March 31^st 2021