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The Impact of Foreign Aid on Economic Growth in ECOWAS Countries: a Simultaneous-Equation Model

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  • Adamu, Patricia A.
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    This paper investigates the impact of foreign aid on economic growth in member countries of the Economic Community of West African States using panel data for 1990-2009 and a three equation simultaneous-equations model. The effect of foreign aid on economic growth among these ECOWAS countries was found to be positive and strong. Other important drivers of economic growth include interest rate, foreign direct investment, and the level of international reserves. The results from the equation on foreign aid indicated that domestic investment, exports, and international reserves have a positive relationship with foreign aid. From the equation explaining investment, domestic savings and exchange rate were found to be positively related to investment. A policy implication of the study is that member countries of the Economic Community of West African States should seek foreign aid as it would greatly accelerate their economic growth.

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    File URL: https://www.wider.unu.edu/sites/default/files/WP2013-143.pdf
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    Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series WIDER Working Paper Series with number 143.

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    Length: 24
    Date of creation: 2013
    Handle: RePEc:unu:wpaper:wp2013-143
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    1. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
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