Aid-Growth Relationship: Evidence From a Co-integratıon Analysis for the Five Poorest Countries of the World

Year 2018, Volume: 9 Issue: 2, 121 - 137, 30.12.2018

Kelvin Onyıbor Sununu İbrahim Bah , Adebayo Tomıwa

Abstract

Abstract:
The impact of Official Development Assistance (ODA) which is geared towards
economic

growth
of the 5 poorest economies of the world (Niger, Congo, Burundi, Malawi, and the
Central

African
Republic) was analysed. Employing a well-structured growth model and yearly
data from

1986
–
2015, we examine this growing nexus
using a robust model specification, hence testing both

the
long and short run relationship between economic growth and ODA. The ARDL
long-run

relationship
and an Error Correction Model (ECM) was used to test for the relationship
alongside

the
rate at which the variables returns back to the long-run equilibrium following
a shock in the

short
run. There exist a significant positive association for Niger as well as Malawi
in the long run,

while
other countries displayed no long-run relationship. Interestingly, the
relationship in the short

run
was found only in Congo. The derived conclusion from this paper is that the
government have

to
re-evaluate the sectoral allocation of foreign Aid received to ensure higher
efficiency and a

prospective
economic growth and development of these countries.

Keywords:
Foreign aid, economic growth, RGDPpc, ARDL, ECM

Keywords

ARDL, ECM

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