Abstract
Nowadays there is a general skepticism, uncertainty, and misapprehension regarding China's foreign aid to developing countries, and very few studies have tried to answer the issue of whether China's foreign aid fails to foster economic growth in the recipient countries. Therefore, this study intend to examine the effects of Chinese foreign aid (disaggregated into Project Aid and Development Loan Aid) on gross domestic savings, gross domestic investment, and economic growth rate in African countries from 2000 to 2014 after a 1-year lag. To analyze the effects, multivariate regression analysis with fixed effect, random effect, and pooled OLS regression estimations were conducted. The finding of this study supports the theoretical hypothesis of a positive relationship between foreign aid, saving, investment, and economic growth rate, through documenting project aid and development loan aid categories impact positively on gross domestic saving and gross domestic investment. Development loan aid also predicted the economic growth rate. Therefore, these results predicted that project aid and development loan aid categories pour into African countries accelerated economic growth. This research also proposed that it would be better to identify the forms of aid flows when obtaining aid from the donor countries. Therefore, it attempts to contribute to the scholars and policymakers by identifying the effectiveness of specific aid components that serve as the key aid flow tool for donor countries. Key words: African countries, Chinese foreign aid, economic growth, investment, saving.
Highlights
Low capital formation has been described by various economic theories as the fundamental problem hinder the growth of most developing countries, Africa, and aid is allocated to play a vital role in capital formation
To understand the effects of Chinese foreign aid on gross domestic saving, investment, and GDP growth rate in African Countries, this study used a sample of 55 countries over 15 years from 2000 to 2014
The result revealed that Chinese foreign aid has a significant and positive effect on gross domestic saving, gross domestic investment, and GDP growth rate during the study period in African countries
Summary
Low capital formation has been described by various economic theories as the fundamental problem hinder the growth of most developing countries, Africa, and aid is allocated to play a vital role in capital formation. Another group of the studies found a mixed result on effects of foreign aid on economic growth, domestic saving, and investment; such as Sabra and Sartawi (2015), Eltalla (2016) and Basnet (2013)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
