| The impact of governance quality and political reforms on economic growth: The case of Ethiopia |
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Author: Sisay G. Mulaw, Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russia Marina Yu. Malkina, Lobachevsky State University of Nizhny Novgorod, Nizhny Novgorod, Russia Abstract: Effective governance is essential for economic growth, poverty reduction, and long-term sustainability of any country’s economy. In developing countries with weak inclusive institutions, such as Ethiopia, governance quality is directly dependent on the success of political reforms aimed at ensuring political stability, the respect for the rule of law, and the implementation of effective economic initiatives. The study aims to explore the relationship between the governance quality and economic growth in Ethiopia based on the World Bank annual data for 1980–2024. Methodologically, the research is grounded in the modernisation theory and institutional economics. To establish the short and long-run relationships between governance quality and economic growth the authors construct an autoregressive distributed lag (ARDL) model. The Worldwide Governance Indicators (WGI) are used as a proxy of institutional quality. The ARDL model shows that, in the long run, governance quality, along with foreign direct investment as a percentage of GDP and the share of agricultural production in GDP, has a significant positive impact on economic growth in Ethiopia, while population growth and unemployment rate have a significant negative impact. In the short run, in addition to these variables, the terms of trade indicator has a significant positive impact on economic growth in the country, while in the long run its impact is insignificant. The study findings indicate that enhancing the political stability and establishing peaceful dialogue between parties are crucial to prevent governance backsliding and are essential for achieving sustainable economic development in Ethiopia. Keywords: economic growth; inclusive institutions; governance quality; political reform; ARDL model; Ethiopia. For citation: Mulaw S. G., Malkina M. Yu. (2026). The impact of governance quality and political reforms on economic growth: The case of Ethiopia. Journal of New Economy, vol. 27, no. 3, pp. 30–50. DOI: 10.29141/2658-5081-2026-27-3-2. EDN: DVCKGC. Article info: received March 31, 2026; received in revised form May 4, 2026; accepted May 15, 2026 |
