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Determinants of Ethiopian banking sector development: a 30-year empirical analysis with ARDL model

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  • Bantyergu Engida Bati

    (Hawassa University)

Abstract

This study examines the determinants of Ethiopia's banking sector development (BSD) through New Institutional Economics (NIE) lenses. The study uses 30 years of secondary data (1994–2023) from the Global Financial Development Database, the National Bank of Ethiopia, and the World Bank. The dependent variable, BSD, was measured using indicators of depth, access, and efficiency. Independent variables include GDP per capita, inflation, fiscal policy, trade openness, remittances, political stability, regulatory quality, and urbanization. The Autoregressive Distributed Lag (ARDL) model was used to analyze short and long run relationships among variables. The NIE perspective reveals how institutional misalignments between formal policies and informal norms shape BSD outcomes. The study's findings revealed that GDP per capita has significant positive impact on BSD both in the short-term (β = 0.2723, p = 0.0029) and long-term (β = 0.1959, p = 0.0001). Remittances showed significant positive influences in both short-term (β = 0.089151, p

Suggested Citation

  • Bantyergu Engida Bati, 2025. "Determinants of Ethiopian banking sector development: a 30-year empirical analysis with ARDL model," Journal of Innovation and Entrepreneurship, Springer, vol. 14(1), pages 1-21, December.
    • Handle: RePEc:spr:joiaen:v:14:y:2025:i:1:d:10.1186_s13731-025-00558-w
    DOI: 10.1186/s13731-025-00558-w
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