Output gap determinants in Ethiopia

The output gap measured as the percentage deviation of actual from its potential level is an indicator economy’s achievement. Output has been important concept used for forming policies. In this study, we estimated and gap, established some macro-economic determinants Ethiopian economy. By using yearly data spanning 1990 to 2018, study HP filtering, production function approaches. Accordingly, both approaches indicated that fluctuating over period—indicating inconsistently frequently deviating level. Mainly, in 1996 2003, showed highest positive negative deviations potential, respectively. also examined effect indicators on ARDL framework. inflation, trade openness, lending rate, FDI are found be having a significant gap. Lending rate openness have effect, whereas inflation This suggests; augmenting domestic utilization capacity, avoiding unrestricted importation and, export diversification, lowering increasing inflow; helps reduce Besides, understanding trend would helpful dealing with inflation.