Abstract:
This study aimed to analyze effect of corruption and public external debt on economic growth in
Ethiopia based on secondary data from pertinent sources, to be estimated from 2000-2019.
Hence, to achieve its objective the researcher uses both descriptive and econometric method of
data analysis. The study employs autoregressive distributed lag approach to co-integration and
Error Correction Model so as to investigate the long-run and short run relationship between the
dependent variable (real gross domestic product) and explanatory variables. The finding of
autoregressive distributed lag bounds to co integration test concludes that the independent
variables have a long run relationship with economic growth and co-integrated them. Error
correction model also identifies a short run relationship. The result revealed that public external
debt has positive and significant effect on economic growth, while corruption has negative and
significance effect on economic growth in long run. This shows that public external debt used to
import productive capital and to increase productivity through the provision of employment
opportunities and adequate infrastructural to accelerate the speed of economic growth. But in
short run unlike to corruption, public debt had a significant negative effect on economic growth
and the speed of adjustment has value 66.3% and with negative sign, it indicates the rate of
convergence towards long run equilibrium. Based on the finding of this study, it is feasible to
recommend the government to strengthen anti- corruption measures and control its budget
administration to regulate its external borrowed money and to increase economic growth.
