The effect of fiscal decentralization on economic growth in sub-national governments of Ethiopia: A two-step system general methods of moments (GMM) approach

The study examines the impact of fiscal decentralization on Ethiopia’s Subnational (Regional) economic growth. The study followed a quantitative research procedure employing data from 2008 to 2021. The units of analysis in the study are Ethiopia’s sub-national governments (SNGs). The study used the two-step System General Method of Moments (GMM) of dynamic panel estimation because it resolves concerns such as endogeneity and heteroscedasticity. The study’s findings revealed that expenditure, revenue, and composite decentralization have a statistically significant negative effect on regional economic growth. Moreover, among the control variables, inflation and government size have a statistically significant detrimental effect on regional economic growth. However, human capital has no significant effect. Ethiopia’s fiscal decentralization contradicts the goals and theoretical underpinnings of fiscal federalism. This may be because fiscal decentralization and economic activities function within an ethnically based federalism framework. The primary implication is that the federal government needs to reevaluate the transfer of fiscal authority to SNGs. Transforming tax policy into a robust institutional mechanism for economic growth is vital. The revenue and spending sides of intergovernmental relations also need to be closely related. As opposed to prior studies, which utilized one or two fiscal decentralization indicators, this study used multiple indicators, making the study more thorough and closing the knowledge gap

Determinants of Commercial Bank Deposit Growth in Ethiopia

The study analysed the short and long-run impacts of endogenous and exogenous factors affecting deposit growth of the Commercial Bank of Ethiopia from 1974/75 - 2013/14. We employed the Vector Error Correction Model to establish the causal relationship among the variables of the study. Results show that exchange rate and branch expansion positively influence deposit growth contemporaneously both in the short-run and long-run while interest rate maintains positive but insignificant impact both in the long-run and short-run. Population and economic growth exhibit a positive relationship with deposit growth but significant only in the long-run. Moreover, inflation maintained a positive and significant impact in the long-run but negative in the short-run. Using the Granger causality test, it was found out a unidirectional causal flow from economic growth to deposit without any feedback while deposit growth has a bidirectional causality with branch expansion and economic growth implicating inflation affecting economic growth through investment. Finally, with error correction -0.0678, full adjustment from actual deposit to equilibrium would require about 15 years, implicating a slow speed of adjustment in every following year

Domestic Bank Merger and Acquisition in Ethiopia: a prudent strategy for efficiency and synergy gain

Due to the expected Ethiopian government’s economic reforms, liberalization, and deregulation initiatives that might follow the country’s continued effort to join the WTO, industry shocks and bandwagon effects may trigger merger and acquisition waves in the banking sector. The current study analyzes the potential strategic and technical efficiency gains from potential domestic bank merger and acquisition (M&A) initiatives in Ethiopia. All the seventeen domestic banks operating in the country from 2013-2017 are part of the study. Input-oriented CRS-DEA and Bootstrapped Panel Tobit regression models were employed to analyze the overall scale efficiency gains among 664 hypothetical merger possibilities. Ownership structure and bank size were used to set context variables. The state-owned banks followed by medium, small, and large private banks scored the highest efficiency during the study period. The results indicate large private banks are the preferred banks offering the highest efficiency gains from M&A. Most of the M&A efficiency gains will be outcomes of a learning effect rather than a pure merger signposting little or no resource and service complementarity among merging units. Moreover, only private banks have an opportunity for a full-scale merger. We conclude no clear relationship between bank size and efficiency performance; the scale effect disfavors M&A among merging units, and the internal organizational theory largely explains the potential domestic bank M&A motives