Testing the Foreign Aid-led Growth Hypothesis in West Africa
AbstractThis paper assesses the foreign aid-led growth hypothesis in a panel of West African countries using panel cointegration techniques ( Pendroni Residual Cointegration Test, Error Correction Model, Johansen Fisher Panel Cointegration Test) and then on a country-by-country basis using time series cointegration techniques (Engle-Granger test, Error Correction Model , Johansen system cointegration test). The panel cointegration results indicate a long run relationship between aid and growth in the whole panel. For the individual countries, at least one test showed evidence of this long run relationship. Granger causality tests were done for the whole panel and then for each country individually to establish direction of causality between foreign aid and economic growth. There is evidence of unidirectional causality from foreign aid to economic growth, from economic growth to foreign aid and there are cases where both variables are independent. A simplified variation of the Chenery and Strout Two-Gap Model was estimated to test the impact of foreign aid and selected explanatory variables on economic growth in countries where aid was found to granger cause growth and this impact varied from country to country.
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 InfoPaper provided by Birkbeck Department of Management in its series Management Working Papers with number 3.
Length: 34 pages
Date of creation: Apr 2013
Date of revision: Apr 2013
Publication status: Published on Birkbeck Department of Management web site, April 2013, pages 1-34
This paper has been announced in the following NEP Reports:
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.:
- Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luca Andriani).
If references are entirely missing, you can add them using this form.