What are the Impact of Foreign Aid to the Economic Growth? Time Series Analysis with New Evidence from Tanzania

Mm, Albiman

doi:10.4172/2151-6219.1000237

Cited by 8 publications

(7 citation statements)

References 27 publications

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“…This result is inconsistent with the expected positive signs of foreign aid theories (see aforementioned). But the negative result is consistent with several empirical studies such as Griffin and Enos (1970), Weisskopf (1972), Papanek (1972) from old literature and Mallik (2008), Gitaru (2015), Mitra and Hossain (2013) , Albiman (2016) and Ferreria and Simoes (2013) from the recent literature. This negative growth effect could be due to several reasons: first as observed by Burnside and Dollar (2004), foreign aid can negatively affect growth in the absence of good policies and second, as observed by Mallik (2008), foreign aid is more likely to have a negative impact on growth if it is directed to more humanitarian aid rather than aid directed to production sectors.…”

Section: Empirical Modelsupporting

confidence: 89%

“…Mitra and Hossain (2013) found a similar result for the Philippines over the period of 1970–2010, and Gitaru's (2015) paper on Kenya over the period 1970–1995 also found a negative impact on growth. Finally, Albiman (2016) found that aid had a negative impact on growth in Tanzania over the period of 1976–2014 (see Table III).…”

Section: Literature Reviewmentioning

confidence: 97%

“…They claimed that the foreign exchange gap occurs when a country's foreign exchange earnings are insufficient to finance its import requirements; therefore, aid is required. Bacha (1990), Easterly (2003), Trinh (2014) and Albiman (2016) added fiscal deficit to create and test the “three gap” model arguing that developing countries suffer from a revenue gap and are unable to finance both public expenditure and public investment.…”

Section: Literature Reviewmentioning

confidence: 99%

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Can foreign aid contribute to sustained growth? A comparison of selected African and Asian countries

Adams

Elassal

2020

WJEMSD

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PurposeIdentifying if aid flows have contributed to economic growth or growth divergence between a sample of Asian and African countries is the purpose of this paper. Using data over the period of 1980–2015, the paper attempts to establish whether aid, in any of its forms, has played a role in economic growth in these countries.Design/methodology/approachA comprehensive literature analysis over the past 70 years sets the scene for the paper. A panel data fixed-effects model is applied for each sample (Africa and Asia) between 1980 and 2015. Both theoretical predictions and empirical studies are used to derive the independent variables selected for modelling.FindingsThe findings strongly suggest that aid flows in both the Asian and African samples have no relation at all to either long-run growth paths or growth divergence. However, there is a suggestion in the case of the Africa sample that governance decline may well be the primary source of growth divergence.Research limitations/implicationsThis result cannot be generalised because it only focuses on six countries but as demonstrated in the paper, other possible samples (from both regions) actually make no difference to the results. It could also be argued (given the comprehensive literature analysis presented here) that it is not essential to have a theoretical relationship between aid and growth because aid is given to different countries with very different characteristics, needs, governance and policy environments.Practical implicationsDonor countries must play a more supervisory role to ensure aid flows are directed to the right channels in recipient countries. Aid should be given to countries which have a certain degree of macroeconomic stability and “good” policy to ensure effectiveness. They also need to pay attention to the sectoral distribution of aid as do recipient countries to better allocate aid flows to productive sectors that contribute to both short- and long-term growth.Social implicationsThese are not given much emphasis in this paper.Originality/valueMost aid–growth studies are based on a large number of countries from different regions with different characteristics or on a single country case. This paper compares between two samples of countries sharing the same characteristics to overcome the heterogeneity problem. This paper is based on a more protracted time series from 1980 to 2015 to capture more accurately the impact of foreign aid on economic growth.

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Section: Empirical Modelsupporting

confidence: 89%

Section: Literature Reviewmentioning

confidence: 97%

Section: Literature Reviewmentioning

confidence: 99%

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Can foreign aid contribute to sustained growth? A comparison of selected African and Asian countries

Adams

Elassal

2020

WJEMSD

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“…Empirical estimations showed aid-growth relationship to "U-inversion," meaning a strong diminishing return relationship. More, [25], [26] revealed a negative impact of foreign aid on economic growth. The influence of foreign aid and domestic savings on economic growth in WAMZ countries was studied [27] which leads to negative impact of foreign aid on economic growth.…”

Section: Research Elaborationsmentioning

confidence: 99%

External Debt, NODA, and GDP Growth Nexus for South Asian and Southeast Asian Selected Economies

Mazher¹,

Dahalan²

2022

JPOME

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The fundamental aim of this study is to fetch out the influence of NODA (net official development assistance) and EDS (external debt stock) on GDP growth in South Asian and Southeast Asian designated economies over 1971 to 2019. This study refers to the Solow-Swan model of economic growth as hypothetical framework in its elementary sort and employ factors such as NODA, EDS, savings, capital, depreciation, governance, and in addition total natural resources rent as control variable. Using panel data sourced from WDI (world development indicators). This study employed various econometric techniques comprise FEM (fixed effect model), panel cointegration, panel dynamic least square (DOLS), and Granger causality test for desired regression estimations. Empirical estimations evident that EDS has a negative and significant impact on GDP growth whereas, NODA had a negative and insignificant impact on GDP growth. A positive and significant influence of savings on GDP growth observed and estimation confirm that by increasing 1% in savings may cause an increase in GDP growth by 13.19 units. Capital has a positive and significant impact on GDP growth and estimation outcomes confirm that an increase of 1% in capital may cause an increase of 10.14 units. A negative and significant impact of depreciation on GDP growth revealed and it is intended that increasing 1% in depreciation may cause a decrease in GDP growth by 5.26 units. A positive and significant impact of TNRR on GDP growth revealed and estimations confirm that an increase of 1% in total natural resource rent may cause an increase in GDP growth by 0.099 units. While, impact of governance on GDP growth revealed insignificant. Lastly, it is also endorsed that a uni-directional Granger causality runs from GDP growth to EDS, EDS to NODA, and no causal relationship has been confirmed between NODA and GDP growth in SA and SEA designated economies over 1971 to 2019.

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“…Despite these large sums received in the form of aids and assistance from advanced countries, Nigeria still wallows in poverty and perpetually experiences economic downturn. In 2018, Nigeria records the highest number (about 91.8 million) of extremely poor people in the world, it records negative growth of real GDP per capital for 2015, 2016and 2017(WDI, 2018 and unemployment rate stood at 21.3% (NBS, 2018). In a bid to ameliorate the demeaning economic situation, the government of Nigeria has embarked on various journeys to advance countries seeking one form of aid or the other.…”

Section: Introductionmentioning

confidence: 99%

Macroeconomic Effect of Foreign Aid

Afolabi¹,

Nwanekwere²

2019

Asian Journal of Economics and Empirical Research

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The study examines the linear and non-linear macroeconomic effect of foreign aid in Nigeria between 1970 and 2017. The macroeconomic variables considered include real GDP per capital growth, investment, real interest rate and consumer price index. It adopts the Linear and Non-Linear ARDL estimation techniques. The linear regression results show foreign aid to have no significant effect on welfare, measured by RGDPPC in the short-run and long-run. On investment however, foreign aid exerts significant positive influence both in the short-run and long-run and the impact of foreign aid on real interest rate and consumer price index is felt more in the longrun, than in the short-run. Looking into the asymmetry relationship, it was found that increase in aid significantly reduces welfare in Nigeria and decrease in aid significantly increases welfare and both positive and negative changes in aid have no significant effect on investment. Real interest rate is unaffected by increase in aid, but significantly affected by decrease in aid. Consumer price index is significantly affected by both positive and negative change in aid in short run and long run.

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What are the Impact of Foreign Aid to the Economic Growth? Time Series Analysis with New Evidence from Tanzania

Cited by 8 publications

References 27 publications

Can foreign aid contribute to sustained growth? A comparison of selected African and Asian countries

Can foreign aid contribute to sustained growth? A comparison of selected African and Asian countries

External Debt, NODA, and GDP Growth Nexus for South Asian and Southeast Asian Selected Economies

Macroeconomic Effect of Foreign Aid

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