Impact of Foreign Assistance on Saving and Economic Growth in Sub Saharan African Countries (Panel Data Analysis)
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Date
2016-06
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Addis Ababa University
Abstract
This study analyzes the impact of foreign assistance on saving and economic growth in Sub- Saharan African countries for the period 1991 to 2014. The empirical analysis has been performed by using Panel Data Estimation method. The main result shows that the effect of foreign assistance on economic growth was positive and significant in the short run. While in the long run, the effect was found to be positive and significant albeit diminishing return to foreign assistance. From the same estimation it was also found that, import has strong effect on economic growth of the nations under study. The other variable considered in this estimation was the macroeconomic stability situation of the sub Saharan African countries and this variable has strong and direct effect on economic growth through enhancing effectiveness of aid. The other focus of the study was effect of foreign aid on the domestic savings. According to the regression result there is significant negative relationship between the level of saving and foreign assistance at 10% level of significance.
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Saving and Economic Growth