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Drivers of economic growth in Ethiopia: Does foreign aid and policy complementarity matter?

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  • Terefe, Kitessa Delessa

Abstract

The main research question here is to address drivers of economic growth in Ethiopia using the time series data from 1970 to 2016 where the complementarity of aid and policy index is critically assessed. The empirical result from cointegration test confirms the existence of long run relationship among the variables entered in the per capita growth equation. In the long run, foreign aid inflow entered alone has a positive and significant impact on economic growth. Again, aid interacted with policy appears to have a positive contribution showing that both aid and policy are complementary to each other. The results of the study calls for devising policies for checking the apparent link and dynamics between population growth and economic growth, capacitating and maintaining institutional qualities, and proper allocation of financial and infrastructural resources to enhance human capital, comprehensible selection and priority for productive public investment for foreign aid to be more effective, putting more efforts to achieve macroeconomic stabilities via use of prudent fiscal, monetary and trade polices used in amalgamations to complement both aid and policy.

Suggested Citation

  • Terefe, Kitessa Delessa, 2017. "Drivers of economic growth in Ethiopia: Does foreign aid and policy complementarity matter?," MPRA Paper 92276, University Library of Munich, Germany, revised 14 May 2018.
    • Handle: RePEc:pra:mprapa:92276
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    5. Georgios Karras, 2006. "Foreign aid and long-run economic growth: empirical evidence for a panel of developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(1), pages 15-28.
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    1. Dervis Kirikkaleli & Ibrahim Adeshola & Tomiwa Sunday Adebayo & Abraham Ayobamiji Awosusi, 2021. "Do foreign aid triggers economic growth in Chad? A time series analysis," Future Business Journal, Springer, vol. 7(1), pages 1-17, December.
    2. Charles Arinze Obiora & Bonn Obiekwe Godwin Nwanolue & Christian Chidi Okeke, 2022. "Sectoral Allocation of Foreign Aids and Poverty Alleviation in Nigeria, 2010-2020," International Journal of Culture and History, Macrothink Institute, vol. 9(1), pages 1-25, December.

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    More about this item

    Keywords

    Economic growth; policy index; foreign aid.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F35 - International Economics - - International Finance - - - Foreign Aid

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