Geda, Alemaychu (Dr.)Yimer, Addis2021-07-192023-11-042021-07-192023-11-042008-07http://etd.aau.edu.et/handle/123456789/27267The main objective of this is study is access the fiscal response to external and in flows in Ethiopia . specifically study the impact of foreign aid on public expenditure ,revenue and domestic borrowing in Ethiopia. The paper provides a critical review of literature on the and –fiscal relation ,and then applies a1R/TCM and impulse response analysis using data for the period 1967-2007 .the study is a good indication that dis-aggregated data utilization could point out which variables are responsive to change 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 loans bad 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. More over ,by incorporating total ODA inflow in a separate models, the study tried to analyze the joint impact of budgetary grant and loan . and that of off budgetary ODA. The result support the conclusion that aid inflows increase public expenditure and biased to be pro- investment . White 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 substitute s and that higher aid flows displace domestic revenues . in the final analysis to mitigate the undesirable impact of aid , building better national capacity to collect domestic revenue and regulatory schemes by donors to avoid possible problems of aid tangibility should be put in place .enThe Fiscal response to External AID for EthiopiaThesis