Abstract
The foreign aid, domestic saving, and economic growth relationships are investigated for a panel of African countries over the period 1965–2000. The departure from earlier studies of the role of foreign aid on economic growth is in the asymptotic theory of likelihood-based panel cointegration allowing for multiple cointegrating vectors. The results reveal that the variables contain a panel unit root and they cointegrate in a panel perspective. The findings show that foreign aid and domestic saving enhance economic growth for all countries in the sample.
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