Foreign Aid and Economic Growth: A Cointegration Analysis of the Six Poorest African Countries
AbstractAfter more than thirty five years of development assistance, the people in the poorest African countries are still living in poverty. Their real per capita income since 1965 has either declined or remained stagnant. The obvious question is: why could these countries not break the poverty trap despite receiving large inflows of foreign aid? This paper examines the effectiveness of foreign aid for economic growth in the six poorest and highly aid dependent African countries, namely the Central African Republic, Malawi, Mali, Niger, Sierra Leone and Togo. Using cointegration analysis, we have found that a long run relationship exists between per-capita real GDP, aid as a percentage of GDP, investment as a percentage of GDP and openness. However, the long run effect of aid on growth was found to be negative for most of these countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 38 (2008)
Issue (Month): 2 (September)
Foreign Aid; Economic Growth; Openness; Cointegration;
Find related papers by JEL classification:
- F35 - International Economics - - International Finance - - - Foreign Aid
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Levy, Victor, 1988. "Aid and growth in Sub-Saharan Africa: The recent experience," European Economic Review, Elsevier, vol. 32(9), pages 1777-1795, November.
- Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-30, Jan.-Feb..
- Burke, Paul J. & Ahmadi-Esfahani, Fredoun Z., 2006. "Aid and growth: A study of South East Asia," Journal of Asian Economics, Elsevier, vol. 17(2), pages 350-362, April.
- Weisskopf, Thomas E., 1972. "The impact of foreign capital inflow on domestic savings in underdeveloped countries," Journal of International Economics, Elsevier, vol. 2(1), pages 25-38, February.
- Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
- John Mukum Mbaku, 1994. "Foreign aid and economic growth in Cameroon: a reply," Applied Economics Letters, Taylor & Francis Journals, vol. 1(4), pages 55-57.
- Kosack, Stephen & Tobin, Jennifer, 2006. "Funding Self-Sustaining Development: The Role of Aid, FDI and Government in Economic Success," International Organization, Cambridge University Press, vol. 60(01), pages 205-243, January.
- Griffin, Keith, 1971. "Foreign Capital, Domestic Savings and Economic Development: Reply," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 33(2), pages 156-61, May.
- Vasudeva Murthy & Victor Ukpolo & John Mbaku, 1994. "Foreign aid and economic growth in Cameroon: evidence from cointegration tests," Applied Economics Letters, Taylor & Francis Journals, vol. 1(10), pages 161-163.
- Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
- Burnside, Craig & Dollar, David, 1997.
"Aid, policies, and growth,"
Policy Research Working Paper Series
1777, The World Bank.
- Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuela Torgler).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.