The relationship between economic growth and inflation: Evidence of Ethiopia

Since both inflation and GDP are not a brand new concepts rather their relationships are expected nonetheless now as a debatable point among macroeconomists financial experts, strategy creators, lawmakers, and even population giving their own examination by direct exploration and presumption based on trend as before. According to this paper, GDP is the dependent variable while inflation (deflator), foreign direct investment, trade openness and population growth are the independent variables of the model. Both the date of the dependent and independent variables are gathered directly from the World Bank. The researcher has selected a sample of 35 years' time collection records from 1985 to 2020 taken away the World Bank's Ethiopia Economic Data repository. Fundamentally, the purpose of this paper is to survey the relationship between inflation and economic growth as well as to test the causes, sources, determinants, and effects of Ethiopian inflation. The data Unit root test, ARDL model (ECM regression), model stability, LMS test, heteroskedasticity test, (Breusch Pagan Godfrey) Ramsey test and descriptive statistics test is applied.