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Fiscal Policy In Ethiopia

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A nation 's economic performance depends on many factors, such as capital accumulation (physical and human capital), technological progress, institutions and population growth (Ben eta al, 2001 and P.Todaro & C.Smith, 2012). Another extremely important factor affecting economic growth is the set of macroeconomic policies of the economy. The three major types of macroeconomic policies are fiscal, foreign exchange and monetary policies.
Fiscal policy concerned on government spending and taxation which is linked to government expenditure plan and taxation structure of an economy (Black, Calitz, Steenekamp, 2013 and Ben, and Andrew, 2001).Studying the impact of fiscal policy on one country’s macro economy is very decisive to have a sound macroeconomic …show more content…

A side of these, different studies analyzed the role of government intervention via its spending and taxation policy in economic growth of the country. James eta al, (2014) assures that fiscal instruments play an important role for developing economies to create a wide opportunities to economic growth. From this government spending is the one which play an important role to create conducive and attractive environment for domestic as well as foreign direct investment through development of infrastructures, electric utility and other social …show more content…

Taxation policies of Ethiopia have many divisions; among those the major divisions are direct tax which is like personal income tax, rental tax, business profit tax and others; and the indirect one includes value added tax, custom duty, excise and turn over taxes. To investigate these issues the paper used static compatible general equilibrium (CGE) model. Since CGE enables to capture broad representation of economic variable relation in the economic system and in order to compute the effects of different policies changes or shocks in the system of the

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