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The short-run and long-run impacts of foreign aid and remittances on economic growth: Evidence from African countries

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  • Dejene Adugna Chomen
  • Richard Danquah
  • Fuzhong Chen

Abstract

This study examines the short-run and long-run impacts of foreign aid and remittances on economic growth in a panel of 31 African countries from 1980 to 2019 utilizing the ARDL Pool Mean Group (PMG) estimation technique. The PMG is utilized based on the outcome of the Hausman test which justifies it appropriateness. There is long-run association among the regressors and the regressand in the model. Our results indicate that, in the short-run, remittance and foreign aid respectively have a negative impact on economic growth but that impact is statistically insignificant. In the long-run, however, remittances have a positive and significant impact on economic growth while foreign aid has a positive but insignificant effect on economic growth on the continent. These results have substantial policy implications. African governments should adopt effective policies to maximize the usefulness and effectiveness of foreign capital, such as foreign aid and remittances, in boosting economic growth.

Suggested Citation

  • Dejene Adugna Chomen & Richard Danquah & Fuzhong Chen, 2024. "The short-run and long-run impacts of foreign aid and remittances on economic growth: Evidence from African countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 33(4), pages 644-664, May.
    • Handle: RePEc:taf:jitecd:v:33:y:2024:i:4:p:644-664
    DOI: 10.1080/09638199.2023.2205967
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