The Foreign Direct Investment has been recognized one of the main tools that can drive the host country to achieve industrialization due to multiple roles of bringing capital investment, technology, and skills, which are vital, the industrialization process.The motivation behind this study is to research the effect of Foreign Direct Investment inflow Industrialization in Ethiopia, utilizing the time series data from 1992-2017 and employing the Vector Autoregressive model (VECM). The result of the Johanson cointegration test demonstrated that there exists a long-run equilibrium relationship between the variables. Moreover, the outcome of VECM for Long-Run analysis shown that FDI has a positive impact and significant on Industrialization while the result of the short-run analysis showed that the FDI has insignificant but positive in impact on Industrialization, which means that the FDI inflows have a significant impact on Ethiopia's industrialization in the end. Similarly, the variance decomposition outcome reveals the impact FDI in the short-run is not too significant, but its impact increases in the long –run. Therefore, this study recommends that the government to give a suitable strategy and policies, which would give the first priority to attract more FDI and associate with the industrialization, process that ongoing on in the country.
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In-Text Citation: (Jie & Shamshedin, 2019)
To Cite this Article: Jie, L., & Shamshedin, A. (2019). The Impact of FDI on Industrialization in Ethiopia. International Journal of Academic Research in Business and Social Sciences, 9(7), 726–742.
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