Graduate School of International Studies Ajou University
This Study investigates the impact of Euro zone debt crisis on Ethiopian real GDP growth. The analysis showed that Ethiopian economy inherently not vulnerable for external shocks because of the country's low degree of integration with external world. However, it is difficult for the country to recover from crisis once affected by the economic shock. To enumerate the effect of the Euro zone sovereign debt crisis on Ethiopian economic growth, the study also used the time series econometric model. After the stationarity and co-integration test, the study formulated the restricted VAR model. The Euro zone sovereign debt crisis was represented by dummy variable. The result implies that Ethiopian real GDP was not significantly affected by Euro zone sovereign debt crisis. Therefore, the country has to react using pre-emptive measures by improving domestic policy.