Public expenditure could play an important role in promoting economic growth and
poverty reduction. Given the significant role of public spending, this study empirically
explores the impacts of public spending on long-run economic growth and poverty
reduction in Ethiopia. In particular, the researcher assessed the effects of public spending
(disaggregated by function into human capital and agriculture) that can be financed via
government saving or foreign saving on economic growth and poverty reduction in the
country through its indirect effects on total factor productivity. The researcher employed
a dynamic computable general equilibrium model that linked with micro simulation
model that is solved recursively for the period 2009-2020. The CGE model used the
updated 2009/10 social accounting matrix (SAM) while the MS model employed the
2004/05 household income, consumption and expenditure (HICE) survey to investigate
household poverty via the consumption expenditure changes from the CGE model.