Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter?
Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter?
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.
CITATION: Kumi, Emmanuel. Aid, Aid Volatility and Sectoral Growth in Sub-Saharan Africa: Does Finance Matter? . Oxon : Taylor & Francis Group , 2017. Journal of African Business, Vol 18, No. 4, October-December 2017, pp. 435-456 - Available at: https://library.au.int/aid-aid-volatility-and-sectoral-growth-sub-saharan-africa-does-finance-matter