THE RELATIONSHIP BETWEEN AIR TRANSPORT EXPENDITURE AND ECONOMIC GROWTH IN ETHIOPIA

Abstract

This study investigates the relationship between air transport expenditure and economic growth in Ethiopia. It uses annual time series data, obtained from the national bank of Ethiopia, World Bank, MoFEC and annual report of the Ethiopian airlines Enterprise, which covers from the year 1986/87 to 2018/19. The study employs Auto Regressive distributive lag model (ARDLM) bond test to estimate the long run and short run parameters. The results show that in the long run domestic air transport expenditure ,expenditure on agriculture ,on culture& sport ,net capital formation and labor force are significantly and positively impact on economic growth in Ethiopia .While military expenditure and trade openness are a significantly and negatively affect economic growth in long run. On the other hand the result from error correction model (ECM) revealed that government expenditure on agriculture and labour force have significantly and positively affect economic growth whereas one lagged military expenditure and trade openness are significantly and negatively affect economic growth in short run. But air transport expenditure, expenditure on culture &sport and capital formation (investment) have weak/no significant effect on economic growth in short run.