Public Final Consumption, Investment and Economic Growth in Ethiopia

There is no a consensus among the mainstream economist about the role of public final consumption and investment spending on economic growth. Ethiopian government has been experiencing increasing government spending in the past 30 years. Especially, after EPRDF took over, Government expenditure both in terms of recurrent and capital have stepped up. Even if public spending plays a considerable role in fulfilling basic need, speeding up economic transformation and alleviating vicious circle poverty in developing country, so far no recent research has been done in Ethiopia regarding the impact of public final consumption and investment expenditure on economic growth. In order to fill the research gap in this area, the author tried to analyze the historical relationship between government final consumption and investment expenditure and economic growth in Ethiopia using Vector Error Correction Model.