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    Testing the foreign aid-led growth hypothesis in West Africa

    Manty Jones, Yakama (2013) Testing the foreign aid-led growth hypothesis in West Africa. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    This paper assesses the foreign aid-led growth hypothesis in a panel of West African countries using panel cointegration techniques ( Pendroni Residual Cointegration Test, Error Correction Model, Johansen Fisher Panel Cointegration Test) and then on a country-by-country basis using time series cointegration techniques (Engle-Granger test, Error Correction Model , Johansen system cointegration test). The panel cointegration results indicate a long run relationship between aid and growth in the whole panel. For the individual countries, at least one test showed evidence of this long run relationship. Granger causality tests were done for the whole panel and then for each country individually to establish direction of causality between foreign aid and economic growth. There is evidence of unidirectional causality from foreign aid to economic growth, from economic growth to foreign aid and there are cases where both variables are independent. A simplified variation of the Chenery and Strout Two-Gap Model was estimated to test the impact of foreign aid and selected explanatory variables on economic growth in countries where aid was found to granger cause growth and this impact varied from country to country.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPMA 1303, ISSN: 2052-0581
    Keyword(s) / Subject(s): Foreign Aid, Growth, Error Correction Model, Johansen Panel Cointegration Test, Engle-Granger test, Granger causality
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Management
    Depositing User: Administrator
    Date Deposited: 15 Oct 2013 13:10
    Last Modified: 15 Oct 2013 13:10
    URI: http://eprints.bbk.ac.uk/id/eprint/8461

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