Investigating the Importance of Foreign Aid in Poverty Reduction: The case of Ethiopia
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Date
2021-09
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Addis Ababa University
Abstract
Many studies which have been conducted and the intense debates about the effectiveness of foreign aid to reduce poverty resulted three different understandings. which includes proponents of aid, opponents of aid and, groups who believes aid can be effective under certain conditions. Therefore, this study was initiated to examine the impact of foreign aid on poverty reduction in Ethiopia. The study was conducted using the Autoregressive Distributed Lag (ARDL) model for joint integration and error correction was used to examine the long-term and short-term relationship between poverty-dependent and independent variables. Foreign aid, remittance, inflation, trade openness, gross domestic product and foreign direct investment were variables used to analyze secondary data from the period 1991 to 2015.The data were collected from World Development Indicator (WDI) data base. The result obtained revealed that foreign aid, foreign direct investment, remittance, gross domestic product and inflation have statistically significant and reduce Poverty. whereas, trade openness has significantly risen poverty in Ethiopia. Therefore, this study recommends Government should be monitor and evaluate the implementation of aid funds to make sure more effectiveness and appropriate utilization of the aid funds to reduce poverty in Ethiopia
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Keywords
Foreign aid, Poverty, ARDL