Foreign Aid vis aa- vis Foreign Exchange Gap under the Ethiopian Economy

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Fentaye Setargie Ejigu
Fentaye Setargie Ejigu
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Fentaye  Setargie Ejigu
Fentaye Setargie Ejigu
1 Adigrat university

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The study has examined the effect of of foreign aid on economic growth in Ethiopia through financing foreign exchange gap (import requirement) over the period 1974 to 2013 using multivariate cointegration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The aid-policy interaction term also has a significant positive effect on growth implying that the effectiveness of aid would have been higher if it was supported by a sound macroeconomic policy environment. The empirical result of import model also indicated that the positive and significant contribution of aid on import requirements in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing foreign exchange gap is proven in this study.

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Fentaye Setargie Ejigu. 2015. \u201cForeign Aid vis aa- vis Foreign Exchange Gap under the Ethiopian Economy\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 15 (GJMBR Volume 15 Issue B4): .

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GJMBR Volume 15 Issue B4
Pg. 21- 32
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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-B Classification: JEL Code: O19
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v1.2

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June 18, 2015

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English

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The study has examined the effect of of foreign aid on economic growth in Ethiopia through financing foreign exchange gap (import requirement) over the period 1974 to 2013 using multivariate cointegration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The aid-policy interaction term also has a significant positive effect on growth implying that the effectiveness of aid would have been higher if it was supported by a sound macroeconomic policy environment. The empirical result of import model also indicated that the positive and significant contribution of aid on import requirements in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing foreign exchange gap is proven in this study.

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Foreign Aid vis aa- vis Foreign Exchange Gap under the Ethiopian Economy

Fentaye  Setargie Ejigu
Fentaye Setargie Ejigu

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