Investigating the Influence of Political Stability of the Aid-Growth Relationship in Sub-Saharan Africa: A Panel Data Approach

Armah, Stephen E.
September 2010
Journal of Economic Development, Management, IT, Finance & Marke;2010, Vol. 2 Issue 2, p32
Academic Journal
This paper examines the inter-relationships among economic growth, foreign aid and political stability for thirty-one Sub-Saharan African (SSA) countries from 1984-2007. The analysis is performed using a unique and reliable index of political stability. The econometric procedure employed corrects for endogeneity due respectively to simultaneity and to time-constant countryspecific effects. The preponderance of the evidence suggests that foreign aid and political stability are significantly related to growth and that aid promotes growth when it is allocated to politically stable SSA countries. These findings suggest that in pursuing the UN's Millennium Development Goals in SSA, political stability is a pertinent factor that should not be ignored.


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