Abstract

This study explores the nexus between foreign aid and Chad's economic growth. Empirical evidence is based on annual data from 1982 to 2018. The study used ARDL, FMOLS, and DOLS techniques to establish interconnection among the economic indicators. Subsequently, the study utilized the wavelet coherence technique to capture causality and correlation between economic growth and the independent variables. One of the wavelet approach's uniqueness is that it shows the pattern and behavior of the variables used, including the different time horizons. Thus, we explore the dynamic influence of gross capital formation, foreign aid, import, and export on Chad's economic growth. The result of the ARDL long-run estimates reveals that gross capital formation and foreign aid exert insignificant impact on GDP growth. However, exports and imports exert a positive and significant impact on GDP growth. Furthermore, the global financial crisis has a negative and significant impact on the economy of Chad. The outcomes of the wavelet coherence test provide supportive evidence for the ARDL long-run outcomes. Hence, we suggested that substantial macroeconomic reforms and economic liberalization initiatives will help in the dissemination of information and promote domestic investment and importation of high-tech goods.

Highlights

  • This study explores the nexus between foreign aid and Chad’s economic growth

  • Researchers [10, 40, 41, 54] suggest that foreign aid helps to improve the economy positively, while other scholars [7, 8, 28], assert that foreign aid has a negative impact on economic growth, and other studies [1, 18] propose it has no significant effect on economic growth

  • To extend the debate on foreign aid, this paper investigates the effect of foreign aid on economic growth and the role of gross capital formation, import, and export in Chad

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Summary

Introduction

This study explores the nexus between foreign aid and Chad’s economic growth. We explore the dynamic influence of gross capital formation, foreign aid, import, and export on Chad’s economic growth. The result of the ARDL long-run estimates reveals that gross capital formation and foreign aid exert insignificant impact on GDP growth. A question keeps arising over the year is what been the impact of foreign aid on the economic growth of recipient countries? Studies conducted by [32, 58] emphasized that the macroeconomic policy of a country plays a significant role in making foreign aid effective. Based on the problems the country is facing, the influence of foreign aid on the economic growth of Chad cannot be ignored. According to the World Bank [66, 67], the amount of foreign aid coming from different donors increased from $391 million in 2014 to $875 million in 2018

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