Predictability of foreign aid and economic growth in Ethiopia

Impacts of external factors on Ethiopia's economic growth: Insights on foreign direct investment, remittances, exchange rates, and imports

“…Both models' coefficient estimates for remittances support the studys' prior result that they have little influence on long-term economic growth. This contradicts past studies (such as [ 115 ]) that emphasized remittances' benefits to Ethiopia's economy. This implies considering other factors that affect this link.…”

“…However, this claim is in opposition to prior academic research, which contends that remittances have a beneficial effect on the economy of Ethiopia [ 20 , 114 ]. Several prior studies [ 21 , 64 , 115 ] have provided evidence suggesting that the complex relationship between remittances and economic growth can be impacted by factors such as financial development and policy changes.…”

Impact of Foreign Aid on Economic Growth in Ethiopia

“…The negative coefficient of the results of foreign aid is consistent with the studies by Siraj ( 2012 ), Haile ( 2015 ), Kidanemariam ( 2013 ), Gebru ( 2015 ), and Abera ( 2017 ) which found the negative impacts of foreign aid on long-run economic growth in Ethiopia. In contrary, Tadesse ( 2011 ), Duresa ( 2022 ), and Girma and Tilahun ( 2022 ) found the positive impacts of foreign aid on long-run economic growth in Ethiopia.…”

“…The coefficient of the lagged error correction coefficient, estimated at −0.8465, is highly significant, has the correct negative sign, and implies a very high speed of adjustment to equilibrium. Gebru ( 2015 ) and Girma and Tilahun ( 2022 ) stated that a highly significant error correction term was a further evidence of the existence of a stable long-run relationship. Moreover, the coefficient of the error term ( ECM-1 ) implies that the deviation from long-run equilibrium level of real GDP in the current period is corrected by 84.65% in the next period to bring back equilibrium when there is a shock to a steady-state relationship among the variables.…”

“…Several studies have been investigated the impact of foreign aid on economic growth in Ethiopia, but they came up with mixed results. For example, studies by Tadesse ( 2011 ), Duresa ( 2022 ) and Girma and Tilahun ( 2022 ) found the positive relationship between foreign aid and the long-run economic growth, while other studies (e.g., Siraj, 2012 ; Haile, 2015 ; Kidanemariam, 2013 ; Gebru , 2015 , and Abera, 2017 ) found the negative relationships between foreign aid and the long-run economic growth in Ethiopia. These mixed results lead to raise question of why impact of aid on economic growth in Ethiopia continues to be paradoxical in its findings.…”