Moller, Lars ChristianWacker, Konstantin M.2015-07-142015-07-142015-06https://hdl.handle.net/10986/22164Ethiopia has experienced a growth acceleration over the past decade on the back of an economic strategy emphasizing public infrastructure investment and supported by heterodox macro-financial policies. To analyze the country’s growth performance during 2000–13, the paper employs a neoclassical cross-country System Generalized Method of Moments regression model. The analysis finds that accelerated growth was driven by public infrastructure investment and restrained government consumption, and supported by a conducive external environment. Macroeconomic challenges arising from declining private credit, real currency overvaluation, and relatively high inflation held back some growth. The model accurately predicts Ethiopia’s growth over the period of analysis and is robust to country-specific parameter heterogeneity and alternative infrastructure variables. Looking ahead, model simulations under alternative policy scenarios are indicative that growth may decelerate in the coming decade, making it challenging for Ethiopia to attain its middle-income country target by 2025. Although simulated growth rates do not vary much by policy scenario, the paper discusses some of the emerging risks associated with a continued reliance on the current infrastructure financing model and potential future adjustments.en-USCC BY 3.0 IGOECONOMIC BOOMFORECASTSGROWTH RATESMONETARY POLICYGOVERNMENT EXPENDITURESPOLICY REFORMSECONOMIC GROWTHNATIONAL ACCOUNTSCAPITAL ACCUMULATIONLAGSREAL INTEREST RATESVALUATIONSTRUCTURAL CHANGESTABILIZATION POLICIESINCOMEINTERESTMACROECONOMIC MANAGEMENTINVESTMENT RATEMARGINAL COSTINTEREST RATEREAL GDPEXCHANGEMACROECONOMIC POLICYGDP PER CAPITATELEPHONE COVERAGERESOURCE ALLOCATIONLIQUIDITYEXPORTSDEVELOPING COUNTRIESMARGINAL PRODUCTPOLITICAL ECONOMYGROWTH MODELPUBLIC INFRASTRUCTUREECONOMIC POLICYDEVALUATIONHIGH INFLATIONVARIABLESTRADE OPENNESSBENCHMARKSINPUTSDEVELOPMENT GOALSINFLATIONTRENDSECONOMIC OUTLOOKCENTRAL BANK LENDINGBANK LENDINGCENTRAL BANKDEVELOPMENTINDIVIDUAL POLICIESSTANDARD DEVIATIONINFLUENCEEMPIRICAL RESULTSTOTAL FACTOR PRODUCTIVITYPER CAPITA INCOMEEXPORT GROWTHTELECOMMUNICATIONSLOW-INCOME COUNTRIESINCOME INEQUALITYECONOMIC DOWNTURNSRELATIVE IMPORTANCEBASE YEARPRODUCTIVITYECONOMETRICSINDUSTRIALIZATIONMONOPOLYDEMOCRATIC INSTITUTIONSDEBTPER CAPITA GROWTHINFLATION RATEINCOME LEVELSECONOMIC REFORMSTRADE POLICYBASKET OF GOODSNATURAL RESOURCESAVERAGINGINTEREST RATE EFFECTPUBLIC INVESTMENTMACROECONOMIC STABILIZATIONEXTERNAL FACTORSTAXESINFRASTRUCTURE INVESTMENTLEADING INDICATORSPRODUCTIVITY GROWTHCONSUMPTIONEMPIRICAL GROWTH MODELHUMAN CAPITALVALUE ADDEDOPPORTUNITY COSTCAPITALWAGESPOPULATION SHAREINTERNATIONAL TRADEOPEN MARKET OPERATIONSECONOMETRIC ANALYSISMACROECONOMIC OUTCOMESFINANCIAL POLICIESEXTERNAL CONDITIONSVALUEBENCHMARKINGCOMPETITIVENESSCREDITMACROECONOMICSSTATE-OWNED ENTERPRISESNATIONAL INCOMEFACTOR PRICESAGRICULTUREGROWTH MODELSMEASUREMENTERROR TERMREAL EXCHANGE RATEBENCHMARKECONOMIC THEORYGLOBAL CONDITIONSPOLICY PERSPECTIVEECONOMICSFIXED EFFECTSTRADEGDPGOODSTHEORYFINANCIAL DEVELOPMENTGROWTH RATEINVESTMENTGROWTH POLICYGROWTH REGRESSIONSTOTAL FACTOR PRODUCTIVITY GROWTHCREDIT RATIONINGGROWTH PERFORMANCEPOVERTYGROWTH REGRESSIONCOUNTRY CHARACTERISTICSECONOMIC TRENDSGINI COEFFICIENTOVERVALUATIONCAPITAL ACCOUNTSPOLICY RESEARCHGROWTH POLICIESHIGH GROWTHMACROECONOMIC POLICIESEXCHANGE RATEPUBLIC SPENDINGOUTCOMESCONSUMPTION INCREASESDEVELOPMENT INDICATORSPOSITIVE EFFECTSMIDDLE INCOME COUNTRIESPRICESLONG RUNGROWTH PROJECTIONSDEVELOPMENT POLICYHUMAN DEVELOPMENTFUTURE RESEARCHGROWTHWorking PaperWorld Bank10.1596/1813-9450-7292