The Fiscal Response To External Aid: A Vector Auto-regressive Analysis (VAR) for Ethiopia
| dc.contributor.advisor | Geda, Alemayehu (PHD) | |
| dc.contributor.author | Yimer, Addis | |
| dc.date.accessioned | 2018-06-25T14:53:25Z | |
| dc.date.accessioned | 2023-11-04T10:27:52Z | |
| dc.date.available | 2018-06-25T14:53:25Z | |
| dc.date.available | 2023-11-04T10:27:52Z | |
| dc.date.issued | 2008-07 | |
| dc.description.abstract | The main objective of this study is to access the fiscal response to external aid inflows in Ethiopia, specifically to study the impact of foreign aid inflows on public expenditure, revenue and domestic borrowing in Ethiopia. The paper provides a critical review of literature on the aid-fiscal relation, and then applies a VAR/VECM and impulse response analysis, using data for the period 1961-2007.The study is a good indication that disaggregated data utilization could point out which variables are responsive to changes in external shocks. By studying the particular fiscal dynamics in Ethiopia using three separate models, the study finds that foreign aid in the form of grant and loan has had a positive impact on government expenditure (loan being pro-investment and grant being pro-consumption), both have a negative impact on domestic borrowing (domestic borrowing being more elastic to a change in grant) and indirect tax collection and no effect on the direct one. Moreover, by incorporating total ODA inflow in a separate model, the study tried to analyze the joint impact of budgetary grant and loan, and that of off -budgetary ODA. The results support the conclusion that aid inflows increase public expenditure and are biased to be pro- investment. While total ODA flows have a negative impact on revenue of the government and borrowing from domestic sources, suggesting that aid and domestic borrowing are close substitutes and that higher aid flows displace domestic revenues. In the final analysis to mitigate the undesirable impacts of aid, building a better national capacity to collect domestic revenue and regulatory schemes by donors to avoid possible problems of aid fungiblity should be put in place | en_US |
| dc.identifier.uri | http://etd.aau.edu.et/handle/123456789/3371 | |
| dc.language.iso | en | en_US |
| dc.subject | External aid inflows | en_US |
| dc.title | The Fiscal Response To External Aid: A Vector Auto-regressive Analysis (VAR) for Ethiopia | en_US |
| dc.type | Thesis | en_US |