Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter?

Emmanuel Kumi (), Muazu Ibrahim and Thomas Yeboah

Journal of African Business, 2017, vol. 18, issue 4, 435-456

Abstract: This article examines the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African (SSA) countries for the period 1983–2014. Findings from the system-generalized methods of moments show that, while foreign aid significantly drives sectoral growth, aid volatility deteriorates sectoral value additions impacting heavily on non-tradable sectors with no apparent effect on the agricultural sector. The deleterious effect of aid volatility on sectoral value additions in SSA is weakened by a well-developed financial system with significant impact on the tradable sector. Evidently, development of domestic financial markets enhances aid effectiveness.

Date: 2017
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DOI: 10.1080/15228916.2017.1363358

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