How Openness Policies Affect Financial Development in Ethiopia: An ARDL Approach

How Openness Policies Affect Financial Development in Ethiopia: An ARDL Approach | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article How Openness Policies Affect Financial Development in Ethiopia: An ARDL Approach Abdillahi Nedif Muse, Saidatulakmal Mohd This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7300673/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 12 You are reading this latest preprint version Abstract Economic openness is essential for financial growth. The advancement of the financial sector is integral to economic progress. Therefore, exploring factors influencing financial development can enhance understanding of how openness affects this area. This study analyzed data from 1980 to 2022, using the Autoregressive Distributed Lag (ARDL) bound testing method to assess short- and long-term impacts of economic openness policies on financial development in Ethiopia. Results indicate that trade openness positively influences financial development long-term, whereas gross domestic product negatively affects it in Ethiopia. In the short term, gross domestic product and fixed capital formation positively contribute to financial development. Conversely, government spending, trade openness, and inflation negatively affect financial development in Ethiopia. Although financial openness positively influences financial development in both periods, this effect is not statistically significant. The error correction model shows that the adjustment coefficient of the financial development index is -0.44, statistically significant at 5%. These findings suggest the government should enhance trade infrastructure and reform trade policies. Promoting financial openness aids financial development; hence, the government should facilitate financial openness. Business and commerce/Economics Social science/Economics Business and commerce/Finance Social science/Finance Financial development trade openness financial openness ARDL Ethiopia Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Under Review Version 1 posted Reviews received at journal 13 Apr, 2026 Reviewers agreed at journal 13 Apr, 2026 Reviewers agreed at journal 08 Apr, 2026 Reviews received at journal 26 Mar, 2026 Reviewers agreed at journal 22 Mar, 2026 Reviewers agreed at journal 18 Mar, 2026 Reviewers agreed at journal 16 Mar, 2026 Reviewers invited by journal 16 Mar, 2026 Editor invited by journal 11 Sep, 2025 Editor assigned by journal 09 Sep, 2025 Submission checks completed at journal 21 Aug, 2025 First submitted to journal 05 Aug, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7300673","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":608493378,"identity":"aadfbd4a-e0c1-417d-a473-10db6b3ce249","order_by":0,"name":"Abdillahi Nedif Muse","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABFUlEQVRIiWNgGAWjYDACCQaDAw8YDvCA2Qk2NsyMDUAWDyEtCXAtaWkILTi1AbUwALVA2WmHIaL4tPDPbt54IKHmjgyDdPPBGw8SzrMzz0hgfPC2jUHOHpcld44VHEg49oyHQeZYskVCwm1mxhkJzIZz2xiMcTrsRg7QL2yHeRgkcswkEn+AtbBJ87YxJPbg0CEP1vIPpCX/m0RCwjmQFvbfQC31uLQYgLQktoFtYQNqOQC2hRmoJQGXwwxBfknsO8zDJpFmDPRLMjNjz8NmyTnnJAx7DmDXIne7efOHD98O2/NLJD+8+SPBLtmwPfnghzdlNvLsDbj8DwVsUDrZsAEcmRIE1CMBO3ni1Y6CUTAKRsEIAQBDn1vviVCJ9wAAAABJRU5ErkJggg==","orcid":"","institution":"Universiti Sains Malaysia","correspondingAuthor":true,"prefix":"","firstName":"Abdillahi","middleName":"Nedif","lastName":"Muse","suffix":""},{"id":608493379,"identity":"232e6aec-c0ac-41a6-bf36-aeef59356149","order_by":1,"name":"Saidatulakmal Mohd","email":"","orcid":"","institution":"Universiti Sains Malaysia","correspondingAuthor":false,"prefix":"","firstName":"Saidatulakmal","middleName":"","lastName":"Mohd","suffix":""}],"badges":[],"createdAt":"2025-08-05 12:38:19","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7300673/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7300673/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":104958338,"identity":"8639f0ff-f303-4824-99a5-3f351c7e74e2","added_by":"auto","created_at":"2026-03-19 08:27:54","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":409879,"visible":true,"origin":"","legend":"","description":"","filename":"OPENNESSPOLICIESANDFINANCIALDEVELOPMENTINETHIOPIA2.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7300673/v1_covered_cb313843-466c-4cbd-9ea3-f9f25c715b43.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"\u003cp\u003eHow Openness Policies Affect Financial Development in Ethiopia: An ARDL Approach\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"humanities-and-social-sciences-communications","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"palcomms","sideBox":"Learn more about [Humanities \u0026 Social Sciences Communications](http://www.nature.com/palcomms/)","snPcode":"41599","submissionUrl":"https://submission.springernature.com/new-submission/41599/3","title":"Humanities and Social Sciences Communications","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"stoa","reportingPortfolio":"Nature AJ","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"Financial development, trade openness, financial openness, ARDL, Ethiopia","lastPublishedDoi":"10.21203/rs.3.rs-7300673/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-7300673/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"Economic openness is essential for financial growth. 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