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The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels)

Received: 28 April 2015     Accepted: 11 May 2015     Published: 21 May 2015
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Abstract

The study has examined the impact of foreign aid on economic growth in Ethiopia through transmission channel (i.e through financing investment) over the period 1980/01 to 2013/14 using multivariate co integration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The empirical result from investment model also indicated that the positive and significant contribution of aid on investment in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing the saving gap is proven in this study. The growth equation further revealed that rainfall variability has a significant negative impact on economic growth. This study indicated also that the country has no problem of capacity constraint as to the flow of foreign aid.

Published in International Journal of Business and Economics Research (Volume 4, Issue 3)
DOI 10.11648/j.ijber.20150403.15
Page(s) 121-132
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Foreign Aid, Economic Growth, Cointegration, VECM, Ethiopia

References
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[9] Gomanee, K., S. Girma, and O. Morrissey (2002). “Aid and Growth in Sub-Saharan
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[23] Lucas, R. E. (1988), “On the Mechanics of Economic Development”, Journal of Monetary Economics, 22(1), pp. 3-42.
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    Fentaye setargie Ejigu. (2015). The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels). International Journal of Business and Economics Research, 4(3), 121-132. https://doi.org/10.11648/j.ijber.20150403.15

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    ACS Style

    Fentaye setargie Ejigu. The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels). Int. J. Bus. Econ. Res. 2015, 4(3), 121-132. doi: 10.11648/j.ijber.20150403.15

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    AMA Style

    Fentaye setargie Ejigu. The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels). Int J Bus Econ Res. 2015;4(3):121-132. doi: 10.11648/j.ijber.20150403.15

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  • @article{10.11648/j.ijber.20150403.15,
      author = {Fentaye setargie Ejigu},
      title = {The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels)},
      journal = {International Journal of Business and Economics Research},
      volume = {4},
      number = {3},
      pages = {121-132},
      doi = {10.11648/j.ijber.20150403.15},
      url = {https://doi.org/10.11648/j.ijber.20150403.15},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20150403.15},
      abstract = {The study has examined the impact of foreign aid on economic growth in Ethiopia through transmission channel (i.e through financing investment) over the period 1980/01 to 2013/14 using multivariate co integration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The empirical result from investment model also indicated that the positive and significant contribution of aid on investment in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing the saving gap is proven in this study. The growth equation further revealed that rainfall variability has a significant negative impact on economic growth. This study indicated also that the country has no problem of capacity constraint as to the flow of foreign aid.},
     year = {2015}
    }
    

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    AB  - The study has examined the impact of foreign aid on economic growth in Ethiopia through transmission channel (i.e through financing investment) over the period 1980/01 to 2013/14 using multivariate co integration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The empirical result from investment model also indicated that the positive and significant contribution of aid on investment in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing the saving gap is proven in this study. The growth equation further revealed that rainfall variability has a significant negative impact on economic growth. This study indicated also that the country has no problem of capacity constraint as to the flow of foreign aid.
    VL  - 4
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Author Information
  • Department of Economics, Adigrat University, Adigrat, Ethiopia

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