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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Aid effectiveness in Africa
Authors:Loxley, JohnISNI
Sackey, Harry A.ISNI
Periodical:African Development Review
Geographic term:Africa
Subjects:development cooperation
economic development
Abstract:This paper revisits the issue of aid effectiveness in Africa by examining the effect of aid on growth. Historically, Africa's development context appears to be an aid-dependent one, and with the New Partnership for Africa's Development (NEPAD) calling for additional capital flows to improve growth levels on the continent, and the attainment of the UN's Millennium Development Goals partly conditioned on aid inflows, there is a new urgency to evaluate the effectiveness of aid. Using a sample comprising 40 member countries of the African Union, and estimating fixed-effects growth models, the authors find a positive and statistically significant effect of aid on growth. Aid increases investment, which is a major transmission mechanism in the aid-growth relationship. An extension of the analysis to examine sources of growth finance shows aid, workers' remittances, debt-service resources and domestic savings are important sources of development finance. Thus, for now, aid matters for the continent's growth. However, given the apparent donor aid fatigue and the debt servicing implications of concessional loans, the paper supports the need to strategize to reduce future dependence on aid. App., bibliogr., notes, ref., sum. [Journal abstract]