Private Investment and Economic Growth: Evidence from Ethiopia

The Share of Private investment in Gross Domestic Product of a country shows its role in the economy by creating employment opportunity, higher income and increased foreign currency earnings.This paper has used the neoclassical growth framework to see relationship among various economic growth factors in Ethiopian context employing co-integrated vector autoregressive model .Results suggest that both private and public investment contributed positively to economic growth for the period under study.Moreover,the impact of private investment for real growth has been greater than that of the public sector investment.Public sector investment also has complementarity with the private capital formation,implying that crowding in impact of public investment on the private investment.