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.
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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)
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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
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