International Studies Reivew Vol. 13 No.2 December 2012

pages:87-112

This paper investigates the impact of foreign aid on investment
and economic growth of Ethiopia for the period 1971-2010.
The result indicates that foreign aid has a statistically significant
positive impact on domestic investment, while aid’s
positive impact on per capita GDP growth does not depend
on any macroeconomic policy conditionality. Rather, aid effectiveness
depends on the peculiar social, political and economic
institutions of particular periods. Aid is effective during both
socialist and democratic regimes. However, aid’s impact on
growth was greater for socialist regimes.