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The Impact of Foreign Aid on Economic Growth in Ethiopia: Accounting For Transmission Mechanisms

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dc.contributor.advisor Esthepanos, Girma (PhD)
dc.contributor.author Birara, Yohannes
dc.date.accessioned 2018-12-07T14:20:08Z
dc.date.available 2018-12-07T14:20:08Z
dc.date.issued 2011-05
dc.identifier.uri http://localhost:80/xmlui/handle/123456789/15016
dc.description.abstract Developing countries in general and Ethiopia in particular has been experiencing huge amount of saving gap, trade gap and fiscal gap for more than four decades. Consequently, there has been a significant net inflow of official development assistance (foreign aid). Therefore, the main objective of the study is to examine the impact of foreign aid on economic growth and the transmission mechanisms (i.e. investment, import and government consumption expenditure) of Ethiopia using Johansson maximum likelihood approach over the period of 1970/1 to 2008/9. The co integration test result indicates the existence of long run relationship among the variables entered in all models. In the long run foreign aid has a positive and significant impact on growth through its significant contribution to investment and import. However, the dynamic short run model points out that aid to have a significant impact on growth it has to be assisted by good monetary, fiscal and trade policy. In addition, in the short run aid has significant impact on government consumption expenditure, which confirms the existence of aid fungibility. The study also confirms the existence of debt overhang problem in the Ethiopian economy. Generally, the theoretical view of the gap models is proven in this study. Aid can enhance growth by financing the three gaps. However to mitigate the problems with aid fungibility and debt overhang problem, foreign aid has to be linked to a good policy framework. en_US
dc.language.iso en en_US
dc.publisher Addis Ababa University en_US
dc.subject The Impact of Foreign Aid en_US
dc.subject on Economic Growth in Ethiopia en_US
dc.title The Impact of Foreign Aid on Economic Growth in Ethiopia: Accounting For Transmission Mechanisms en_US
dc.type Thesis en_US

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