Is Grant-Aid More Effective than Concessional Loans? Evidence from a Dynamic Panel of Sub-Saharan African Countries

Anupam Das, Syeed Khan

Abstract


Despite being one of the highest aid recipient regions, the growth performance in Sub-Saharan Africa (SSA) has been rather disappointing. In this paper, we answer two questions. 1) Is there any significant impact of foreign aid on economic growth? 2) Is grant more effective than loans in promoting growth? To answer these questions, we employ a GMM technique for a panel of 27 SSA countries over the period of 1961 to 2009. By using this technique, we are able to control for endogeneity that may arise from explanatory variables. Our results suggest that grant aid is more effective than concessional loans. On average, aggregate aid’s effect on economic growth is not discernable from zero in SSA countries. These questions are important for policymakers of SSA who often face the dilemma of high aid but low growth.


Full Text: PDF DOI: 10.5539/ijef.v4n1p14

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.