THE IMPACT OF OFFICIAL DEVELOPMENT ASSISTANCE ON AGRICULTURAL GROWTH OF ETHIOPIA

Abstract

Less developing countries including Ethiopia, mainly their economy is dependent on agriculture, and less productivity of this sector is not a question of only being poor nation rather it is a livelihood of their society and with a visible resource gap the productivity of this sector is unexpected. To fill this resource gap least developing country`s lookup and depend on external assistance from developed countries. This study have an objective of whether official development assistances has an impact on agricultural growth of Ethiopia or not, with time series data of 1985 to 2013 using vector error correction model in order to know if they have a short run and long run relationship. All necessary time series tests such as stationary test, co-integration test, causality test and other necessary test are taken. And the result of the study reveals that Official Development Assistance has a negative and significant impact on agricultural growth in the short run there will be displacement or dutch disease effect and also it has a positive significant impact in the long run since financing in investment or adapting new technology or knowledge, its result will be after a while. There for Ethiopia, as a country has to work on enhancing domestic factors for productivity of agriculture sector, raising the capacity of producers through different mechanisms and use resources more effectively and in advanced way, also effective use of the external assistance is very necessary since it has significant impact both in the short run and long run.