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Foreign Aid and Economic Growth: A Cointegration Analysis of the Six Poorest African Countries

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  • Malik, Girijasankar

    (School of Economics and Finance (Parramatta Campus), University of Western Sydney, Locked Bag 1797, Penrith South DC, NSW 1797)

Abstract

After 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.

Suggested Citation

  • Malik, Girijasankar, 2008. "Foreign Aid and Economic Growth: A Cointegration Analysis of the Six Poorest African Countries," Economic Analysis and Policy, Elsevier, vol. 38(2), pages 251-260, September.
    • Handle: RePEc:eee:ecanpo:v:38:y:2008:i:2:p:251-260
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    Citations

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    Cited by:

    1. Jiang Hongli & Prince Asare Vitenu‐Sackey, 2023. "Assessment of the effectiveness of foreign aid on the development of Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 79-92, January.
    2. Innocent .U. Duru & Bartholomew .O.N. Okafor & Millicent Adanne Eze & Gabriel .O. Ebenyi, 2020. "Foreign Aid and Economic Growth: Empirical Evidence from Nigeria," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 35-50.
    3. Tadesse, Tasew, 2011. "Foreign aid and economic growth in Ethiopia," MPRA Paper 33953, University Library of Munich, Germany, revised 20 Sep 2011.
    4. Zoundi, Zakaria, 2015. "The Absorption and Spending Capacity of Aid in the Economic Community of West African States," MPRA Paper 66736, University Library of Munich, Germany, revised 23 Aug 2015.
    5. Katarina Juselius & Niels Framroze Møller & Finn Tarp, 2014. "The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 153-184, April.
    6. Savin, Ivan & Marson, Marta & Sutormina, Marina, 2020. "How different aid flows affect different trade flows: Evidence from Africa and its largest donors," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 119-136.
    7. Zoundi, Zakaria, 2015. "On The Trade-Off Between Welfare and Peace: Evidence from West African Countries Using a Quantile Regression," MPRA Paper 79776, University Library of Munich, Germany, revised 2016.
    8. Kawthar Aghoutane & Mohamed Karim, 2017. "The Impact of Foreign Aid on Economic Growth in Morocco: Econometric Analysis Using VECM," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(5), pages 87-93, May.
    9. Katarina Juselius & Niels Framroze Møller & Finn Tarp, 2014. "The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 153-184, April.

    More about this item

    Keywords

    Foreign Aid; Economic Growth; Openness; Cointegration;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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