Impact of Foreign Aid on Economic Growth (original) (raw)
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EVALUATING THE IMPACT OF FOREIGN AID ON GROWTH: A CASE OF KENYA
There is no consensus on aid effectiveness and the resulting policy recommendations have been conflicting. Foreign aid to developing countries is a subject of heated debate among politicians, economists, and development specialists. Over the past 50 years Kenya has received several billions of foreign aid, the equivalent of several Marshall Plans. Some of this has been extremely useful: Treatments for HIV/AIDs, food to prevent starvation, and support for immunization programs. A large amount of the literature on foreign aid on economic development in Kenya is based on cross-country analysis and therefore simply yields some patterns that hold on average. The goal of this paper is to evaluate the role of World Bank aid in economic development in Kenya. We find that World Bank aid has strong beneficial effects on per capita income in Kenya. We established a very strong statistical association between sound economic policies and the performance of the World Bank aid in Kenya in our period of study. The study has presented ample evidence that with sound track record of macroeconomic policy management that is by keeping inflation modest, prudent fiscal policy and good financial policy World Bank aid can spur economic growth. The implication for policy is that in order for Kenya to foster and sustain growth, closer attention should be given to increase of World Bank aid, stable macroeconomic stability and sectors where the aid is directed.
Impact of Foreign Aid on Economic Growth in Kenya 2006-2020
Journal of International Relations
Purpose: The objective of this study was to examine the impact of foreign aid on economic growth in Kenya. Methodology: The study used a descriptive research technique and a time series approach to track economic growth in Kenya for 41 years, from the year 1980 to 2020. The study also adopted a census survey to collect secondary data by use of a secondary time series data template from the World Bank and KNBS databases in Kenya for the period 1980 to 2020. The collected data was edited, coded and analyzed using statistical package for social sciences (SPSS). Findings: The results of the study revealed that ODA, emergency & food aid, debt forgiveness and technical cooperation had a positive and significant relationship with economic growth(GDP). In addition, ODA, emergency & food aid and debt forgiveness have a positive and significant impact on economic growth. However, technical cooperation had a negative and no significant impact on economic growth in Kenya Unique Cont...
Foreign Aid and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa
Theoretical Economics Letters
This study aims at understanding the impact of foreign aid on the economic growth of the Sub Saharan African region. Despite being the largest foreign aid recipient in the world, the region is the poorest with the lowest Human Development Index (HDI) and Gross National Income (GNI) per capita. This raises serious questions about the effectiveness of foreign aid to the economic growth and development of the region. As such, we examine the relationship between foreign aid, determined by the official development assistance (ODA), and the economic growth rate of the Sub Saharan Africa's ten largest recipients of foreign aid, for a 23-year period from 1990 to 2012. These ten countries include Ethiopia,
The Impact of Aid on the Economic Growth of Developing Countries (LDCs) in Sub-Saharan Africa
2017
Least Developed Countries (LDCs) of Sub-Saharan African have been recipients of official development assistance for more than 5 decades; however they are still characterized by chronic problems of poverty, low living standards and weak economic growth. The hot question is: Is aid effective in promoting economic growth? Thus, this paper investigates the impact of aid on the economic growth of 12 least developed countries in Sub-Saharan Africa over a period of 20 years. I take a fixed effects instrumental variable approach and the results imply that aid has a statistically insignificant negative impact on economic growth. I therefore conclude that aid is ineffective in promoting growth, perhaps due to misallocation of aid or inefficient use.
Foreign aid and economic growth in sub-Saharan Africa
African Journal of Economic and Management Studies, 2019
Purpose The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the sub-Saharan Africa (SSA) region from 1993 to 2017. Design/methodology/approach A sample of 45 SSA countries for the period 1993–2017 is considered for this study. The study uses various econometrics tools such as Pedroni and Kao’s cointegration test, Johansen-Fisher Panel cointegration test, FMOLS and PDOLS in order to ascertain the long-run and short-run dynamics among the variables under consideration. Findings The empirical results find that long-run and short-run relationships exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the SSA economies. The authors also find unidirectional causality running from foreign aid to economic growth. The policymakers in these countries are well-advised to implement suitable policy measures to build on the growth momentum created by foreign aid in...
Effect of Foreign Aid On poverty in Kenya
International Journal of Economics, Business and Management Research
This article investigates the effect of foreign aid on poverty in Kenya. Poverty has emerged as one of the main public concerns across the globe. Every year, the gap between rich and poor grows wider, and many countries' circumstances have deteriorated. In Kenya, the wealth disparity has reached extreme proportions, with less than 10% of the population owning more wealth than the bottom 90%. Kenya is a developing country that aims to be industrialized by 2030.Economic growth is expected to increase in order to achieve the vision 2030, so the government must also understand the trends, causes, and effects of poverty in order to formulate relevant policies to ensure equitable income distribution and high living standards by 2030.In order to establish the existing relationship, the study investigated the effect of foreign aid on poverty in Kenya. This study made use of time series data spanning from years 2010 to 2020. The study employed causal-effect research design to establish t...
Mediterranean Journal of Social Sciences, 2013
The study examined the impact of foreign aid on economic growth using a sample of 26 HIPC countries from the Sub-Saharan Africa over the period 1980 to 2006. Using Random Effects method, the results show that firstly the initial level of income, investment, growth in labour force, government size, debt service and aid intensity are the main determinants of growth in SSA. Secondly the study finds evidence of a direct positive impact of aid intensity on economic growth being significantly different from zero. However, this direct impact does not compare favourably with the impact exerted by investment and government size on economic growth. Thus while the findings support moves by the G8 to double aid to developing countries including Africa, the need for Africa to industrialize remains a necessary precondition for the growth impact of aid to be meaningful.
Assessment of the effectiveness of foreign aid on the development of Africa
International Journal of Finance & Economics, 2020
Foreign aid with the aim of propagating growth and development in developing countries has been in existence since the end of World War II. Africa as the recipient of aid over this period is still wallowing in poverty and underdevelopment. This phenomenon has interested many researchers and donor agencies to unravel the true impact of aid to the developmental agenda of Africa but the findings are mixed and inconsistent. Our study focused on 50 African countries for the period of 1996 to 2017 on a panel study. The study adopts panel data methodologies such as generalized linear model, Arellano-Bond dynamic panel data estimations (GMM two-step approach), and granger causality to achieve our objective of identifying the linear and dynamic relationship among the variables. Foreign aid through developmental assistance is assumed to significantly impact growth but the results from our study report an opposing view thus negative and statistically linear and dynamic relationship. Moreover, the undermining factors hindering aid-growth relationships in Africa are high levels of corruption, poverty, low level of human development, political instability, and poor institutional quality. On this note, we would like to recommend to policymakers to focus on technical assistance and educational projects that could strengthen institutions rather than other developmental projects. In essence, these would propagate development in the immediate time to promote long-run growth agenda.
Aid Unpredictability and Economic Growth in Kenya
2015
Studies on the impacts of aid on growth are not limited. Some have found positive effects, others negative effects, others no effect and others have found positive impacts only under certain conditions. A less examined aspect is the role of aid unpredictability on growth. While aid unpredictability may negatively affect growth when it disorientates the recipient country’s consumption and investment planning, it may also boost economic growth if it is triggered by responses to economic shocks. It may also induce strengthening of systems of aid absorption in the recipient country that improves aid effectiveness and economic growth. This paper assesses the heterogeneous impacts of aid on growth in a low income country with different aid unpredictability episodes and finds that increased aid unpredictability weakens economic growth in Kenya. In addition, aid unpredictability is found to improve economic growth in an unstable macroeconomic environment implying that aid unpredictability f...