How Effective has Development Aid been over the Years: A Panel Data Analysis of Sub-Saharan Africa Open Access
This paper examines the effectiveness of different types of foreign aid in Sub-Saharan Africa using an unbalanced panel of all Sub-Saharan countries from 2000 to 2017. A regression analysis of entity fixed effect is used to control for omitted variable bias. Various regressions and tests of the most significant and robust individual interactions are simultaneously modeled, thereby deriving multiple conditions of aid effectiveness. Six different regression models are use in other to find how effective foreign aid is to economic growth. It was found out that, Other development aid (aid to support the economic, social, and political development of developing countries) has a negative effect on economic growth in countries with higher inflation compared to Private aid (Direct investment, portfolio investment and net exports credit) which has no significant effect on economic growth. Again, in countries with higher inflation; food aid (hunger alleviation and food security) has a positive impact on economic growth while grant has a negative impact. In Francophone countries; other development aid and grants have a negative impact on economic growth. This means, donors need can be more specific with the kind of aid sent to sub-Saharan Africa (developing countries) example is food aid which has positive impact. Aid effectiveness depends on the policies of the country thus, more of what Sub-Saharan counties (developing countries) can do for themselves than what they receive from foreign organizations and countries. African countries need to get good economic policies for foreign aid to be effective. Also, donors can consider the specific needs of countries and give specific kind of aid
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