Abstract:
The main objective of this research is to empirically examine the impact of private and
public physical capital accumulations on economic growth in Ethiopia for the period
ranging from 1975-2013 by using Johansen maximum likelihood co-integration
approach. The result shows that real private capital accumulation, public capital
accumulation, human capital and trade openness have positive and statistically
significant impact while active labor force has positive but insignificant impact in
determining economic growth of Ethiopia in the long run. In addition, in the short run
only human capital at its first difference is statistically significant in determining
economic growth in the country while private and public capital stocks have insignificant
impact on real GDP in the short run. This is because their impact may be seen in the long
run or capital stock needs a long gestation period to bring a sustainable increment in
economic growth. Overall, the major policy implication of this study is that, given the
long run positive impact of private and public capital stocks on economic growth, it will
be natural to think of supplementary reforms for the development of such sectors.
