The Effect of Aid on Growth in the Presence of Economic Regime Change
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Date
2019
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Publisher
African Finance Journal
Abstract
The empirical literature on aid effectiveness is mired in controversy. In this regard, the paper
aims to investigate the effect of aid on economic growth in Ghana. Using Auto-Regressive
Distributed Lagged Models as the main estimation strategy, the study concludes that aid has a
positive and statistically significant effect on economic growth. The effect of aid on economic
growth is more pronounced taking into account the marginal effect of a shift in economic policy
from a controlled economic regime to an open market system. The result is robust when the
data is triangulated with other estimation methods. Following the key findings, the study
recommends that government pursues economic policies that promote more private-sector
participation. Also, alternative financing that focuses on the domestic market should be
encouraged to avoid the negative impact of dwindling aid inflows.
Description
Research Article
Keywords
Economic Growth, Aid, Economic Regime, Cointegration, Ghana