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Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter?

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  • Emmanuel Kumi
  • Muazu Ibrahim
  • Thomas Yeboah

Abstract

This article examines the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African (SSA) countries for the period 1983–2014. Findings from the system-generalized methods of moments show that, while foreign aid significantly drives sectoral growth, aid volatility deteriorates sectoral value additions impacting heavily on non-tradable sectors with no apparent effect on the agricultural sector. The deleterious effect of aid volatility on sectoral value additions in SSA is weakened by a well-developed financial system with significant impact on the tradable sector. Evidently, development of domestic financial markets enhances aid effectiveness.

Suggested Citation

  • Emmanuel Kumi & Muazu Ibrahim & Thomas Yeboah, 2017. "Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter?," Journal of African Business, Taylor & Francis Journals, vol. 18(4), pages 435-456, October.
    • Handle: RePEc:taf:wjabxx:v:18:y:2017:i:4:p:435-456
    DOI: 10.1080/15228916.2017.1363358
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