Effectiveness of Foreign Aid to Africa

This paper investigates empirically the effectiveness of foreign aid during the period 1990 to 2010 in the case of African countries. The approaches of this work are different from previous works in three ways. Firstly, the theoretical and the empirical literatures on foreign aid, and the historical origins of foreign aid are reviewed. Secondly, using an annual dataset of 54 African countries, and the Solow and Swan growth model to study whether foreign aid works for African countries or not? Thirdly, I have employed the system Generalized Method of Moments (GMM)estimator originated by Arellano and Bond. The empirical evidence suggests that FDI is significantly and positively correlated with growth for African countries but not foreign aid. Furthermore, I have used several alternative panel data estimation techniques; the Ordinary Least Squares (OLS), Fixed Effects (FE),Between Effects (BE),Random Effects, Hausman Taylor (HT)test as well as Breush and Pagan Lagrangian Multiplier (BPLM) test methods to control the significant of the variables. The empirical evidence suggests that foreign aid significantly and positively correlates with growth for African countries.

Autorentext

I have Master of Art in International Economics from Faculty of Economic Science at the University of Warsaw-Poland. Before my master's study I also have Certified Accountant Technicians Affiliate from Association of Characted Certified Accountant, UK and Graduate Diploma in Accounting from Management Accountancy Technology Institute,in Accra-Ghana.