Abstract
The objective of this paper was to investigate the impact of foreign aid and trade openness on economic performance for a panel of 30 sub-Saharan African countries over the period 1970–2017 using panel cointegration techniques. The findings obtained in this paper suggest that foreign aid has contributed significantly to economic performance in SSA while trade openness has been detrimental to economic performance during the period under consideration. Also, the combined effect of aid and trade openness has enhanced economic performance. From a policy perspective, the study suggests that more should be done so that the benefits from aid inflows would result in sustained economic performance. Also, the external trade sector should be given the needed attention it deserves. Keywords: aid, trade openness, economic performance, panel cointegration, sub-Saharan Africa DOI: 10.7176/DCS/12-2-02 Publication date: February 28 th 2022
Highlights
The extent to which foreign aid and international trade affect economic performance has been a subject of intense discussion in development literature related to sub-Saharan Africa (SSA) in recent times
The objective of this paper was to investigate the impact of foreign aid and trade openness on economic performance for a panel of 30 sub-Saharan African countries over the period 1970–2017 using panel cointegration techniques
The findings suggest that foreign aid has contributed significantly to economic performance over the period under consideration but trade openness has been detrimental to economic performance in SSA over the same period
Summary
The extent to which foreign aid and international trade affect economic performance has been a subject of intense discussion in development literature related to sub-Saharan Africa (SSA) in recent times. This has resulted mainly from the adoption of the structural adjustments and reform programmes of the World Bank and International Monetary Fund by many SSA countries (e.g. Ghana, Nigeria, Burkina Faso, Zambia and Kenya). One feature of these programmes was that they involved large amounts of foreign aid to finance economic activities in SSA. An amount of foreign aid received by a country can be conditioned on the extent to which it has opened up its economy to international trade with other countries especially donors
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