• Open Access

The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis

Authors


  • We wish to express our sincere appreciation for most insightful comments and constructive critique from two anonymous OBES referees as well as clear editorial guidance that helped improve our paper significantly. Our study was elaborated within the UNU-WIDER project on research and communication on Foreign Aid (ReCom), and we acknowledge financial support from Danida, Sida and UNU-WIDER.

Abstract

We comprehensively analyse the long-run effect of foreign aid (ODA) on key macroeconomic variables in 36 sub-Saharan African countries from the mid-1960s to 2007, using a well-specified cointegrated VAR model as statistical benchmark. Results provide broad support for a positive long-run impact of ODA flows on the macroeconomy. In contrast, we find little evidence supporting the thesis that aid has been harmful. From a methodological point of view we highlight the importance of transparency in reporting results, especially when the hypothesis being tested differs from theoretical expectations, and we identify reasons for econometrically inadequate results in the literature.

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