Impact of Official Development Assistance on Economic Growth in the East African Community
Keywords:
Official Development Assistance; Vector Error Correction Model; Trade openness; economic growth; developing countries
Abstract
This research focuses on the effect of Official Development Assistance (ODA) on the economic development of the East African Community, with Trade openness as a moderating variable. This study adopts a Vector Error Correction Model (VECM) for 1974-2022 to investigate the cointegration between ODA balance, trade openness, and economic growth in five East African countries. The findings reveal a complex dynamic: whereas ODA has a negative individual impact on economic growth, the interaction of ODA and Trade openness has a positive and significant value. This means that characteristics of the trade policy condition the ability of ODA to promote economic growth. Based on the findings, the study adds to the ever-ongoing aid inefficiency discourse by underlining the necessity of an 'enabling environment' in the form of trade openness, significantly boosting the growth impact of ODA. These outcomes have significant implications for policymakers in countries of the third world where compliance with ODA missions could be made efficient by implementing the missions of trade openness. According to the study, there is a call for the strategies of foreign aid and trade liberalization toward the development of economic growth in developing countries.
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References
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28. Han, C., Phillips, P. C., & Sul, D. (2017). Lag length selection in panel autoregression. Econometric Reviews, 36(1-3), 225-240.
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31. Höppner, M. (2020). The Global Trade Environment–A New Reality. The handbook of global trade policy, 23-46.
32. Kalman, M. (2019). “It requires interest, time, patience and struggle”: Novice researchers’ perspectives on and experiences of the qualitative research journey. Qualitative Research in Education, 8(3), 341-377.
33. Lasanthika, C., Wanigasuriya, K., Hettiaratchi, U., Amarasekara, T. D., & Goonewardena, C. S. E. (2023). Psychometric properties of End Stage Renal Disease-Adherence Questionnaire-Sinhalese version among patients receiving haemodialysis. Plos one, 18(10), e0292938.
34. Liew, C. Y., Mohamed, M. R., & Mzee, S. S. (2012). The repercussion of ODA on economic growth of East African country. Journal of Economics and Sustainable Prosperity, 3(12), 129-188.
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36. Lopez, L., & Weber, S. (2017). Testing for Granger causality in panel data. The Stata Journal, 17(4), 972-984.
37. Lütkepohl, H., & Schlaak, T. (2018). Choosing between different time‐varying volatility models for structural vector autoregressive analysis. Oxford Bulletin of Economics and Statistics, 80(4), 715-735.
38. Martinez-Zarzoso, I. (2015). The trade effects of foreign aid: an empirical perspective. In Handbook on the economics of foreign aid (pp. 179-196). Edward Elgar Publishing.
39. Muturi, W. (2012). Effect of Foreign Inflows on Economic Growth of East African Member Countries.
40. Razali, N. M., & Wah, Y. B. (2011). Power comparisons of shapiro-wilk, kolmogorov-smirnov, lilliefors and anderson-darling tests. Journal of statistical modeling and analytics, 2(1), 21-33.
41. Refaei, R., & Sameti, M. (2015). Official prosperity assistance and economic growth in Iran. International Journal of Management, Accounting and Economics, 2(2), 125-135.
42. Rutberg, S., & Bouikidis, C. D. (2018). Focusing on the fundamentals: A simplistic contrastingiation between qualitative and quantitative research. Nephrology Nursing Journal, 45(2), 209-213.
43. Schaeffer, S. F. (2013). The impact of music listening on hospice patients' acceptance of a good death: A qualitative study of hospice caregivers' perceptions. Capella University.
44. Schmidt, P., & Sickles, R. (1975). On the efficiency of the Almon lag technique. International Economic Review, 792-795.
45. Schwarz, G. (1978). Estimating the dimension of a model. The annals of statistics, 461-464.
46. Suphian, R., & Kim, S. S. (2017). Official prosperity assistance and economic growth in East African country. 평화학연구, 18(2).
47. Taherdoost, H. (2016). Validity and reliability of the research instrument; how to test the validation of a questionnaire/survey in a research. How to test the validation of a questionnaire/survey in a research (August 10, 2016).
48. Veledinah, J. M. (2014). Impact of official development assistance on economic growth in Kenya (Doctoral dissertation, University of Nairobi).
49. Yiew, T. H., & Lau, E. (2018). Does ODA contribute to or impeded economic growth?. Journal of International Research work Vol, 11(3), 21-30.
50. YITAYEW, W. (2017). The impact of the banking sector on the real economy in Ethiopia: an Empirical Analysis (Doctoral dissertation, Addis Ababa University).
2. Adeniran, A. O., Azeez, M. I., & Aremu, J. A. (2016). External debt and economic growth in Nigeria: A Vector Auto-Regression (VAR) approach. International Journal of Management and Commerce Innovations, 4(1), 706-714.
3. Akaike, H. (1969). Fitting autoregressive models for prediction. Annals of the Institute of Statistical Mathematics, 21(1), 243-247.
4. Akaike, H. (1973). Maximum likelihood identification of Gaussian autoregressive moving average models. Biometrika, 60(2), 255-265.
5. Akaike, H. (1979). A Bayesian extension of the minimum AIC procedure of autoregressive model fitting. Biometrika, 66(2), 237-242.
6. Apuke, O. D. (2017). Quantitative research methods: A synopsis approach. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(5471), 1-8.
7. Balogun, R. B. (2021). Determinants of Foreign Portfolio Investment in Sub-Saharan Africa (Master's thesis, Kwara State University (Nigeria)).
8. Baltagi, B. H., & Kao, C. (2001). Nonstationary panels, cointegration in panels and dynamic panels: A survey. In Nonstationary panels, panel cointegration, and dynamic panels. Emerald Group Publishing Limited.
9. Bilon, X. J. (2023). Normality and significance testing in simple linear regression model for large sample sizes: a simulation study. Communications in Statistics-Simulation and Computation, 52(6), 2781-2797.
10. Booth, D. (2012). Aid effectiveness: bringing country ownership (and politics) back in. Conflict, Security & Development, 12(5), 537-558.
11. Brooks, M. E., Mugabo, M., Rodgers, G. M., Benton, T. G., & Ozgul, A. (2016). How well can body size represent effects of the environment on demographic rates? Disentangling correlated explanatory variables. Journal of Animal Ecology, 85(2), 318-328.
12. Ceesay, L. O. (2020). Institutional sustainability in the context of international donor funded programs in fragile and post-conflict communities of West Africa:(The cases of CDDP funded decentralised village development institutions in the Gambia and Sierra Leone) (Doctoral dissertation, Dissertation, Erfurt, Universität Erfurt, 2021).
13. Chang, C. C., & Mendy, M. (2012). Economic growth and openness in Africa: What is the empirical relationship?. Applied Economics Letters, 19(18), 1903-1907.
14. Chatterjee, S., & Simonoff, J. S. (2013). Handbook of regression investigation. John Wiley & Sons.
15. Cooper, D. R., & Schindler, P. S. (2016). Métodos de Pesquisa em Administração-12ª edição. McGraw Hill Brasil.
16. Dedehouanou, S. E. A., & Kane, A. (2021). Spillover Effect of Official Prosperity Assistance on Sectoral Economic Growth in West African Economic and Monetary Union Country. International Journal of Economics and Financial Issues, 11(3), 1-12.
17. Emmanuel, A. M. O. A. H. (2015). Modeling GDP Using Vector Autoregressive (VAR) Models: An Empirical Evidence from Ghana (Doctoral dissertation, University of Ghana).
18. Enders, W., & Lee, J. (2004, June). Testing for a unit root with a nonlinear Fourier function. In Econometric Society 2004 Far Eastern Meetings (Vol. 457, pp. 1-47).
19. Engle, R. F., & Granger, C. W. (1987). Cointegration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276.
20. Geda, A., & Yimer, A. (2023). Fundamental and proximate drivers of public debt in Ethiopia. Research Paper. Ottawa: International Development Research Center (IDRC).
21. Ghasemi, A., & Zahediasl, S. (2012). Normality tests for statistical investigation: a guide for non-statisticians. International journal of endocrinology and metabolism, 10(2), 486.
22. Gliner, J. A., Morgan, G. A., & Leech, N. L. (2016). Research methods in applied settings: An integrated approach to design and investigation. Routledge.
23. Glynn, J., Perera, N., & Verma, R. (2007). Unit root tests and structural breaks: A survey with applications.
24. Glynn, J., Perera, N., & Verma, R. (2007). Unit root tests and structural breaks: A survey with applications.
25. Granger, C. W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: journal of the Econometric Society, 424-438
26. Greene, W. H. (2003). Econometric investigation. Pearson Education India.
27. Guzman, C., Vasquez, F., & Sanchez, F. (2024). Firm heterogeneity and innovation strategy decision. Latin American Economic Review, 33.
28. Han, C., Phillips, P. C., & Sul, D. (2017). Lag length selection in panel autoregression. Econometric Reviews, 36(1-3), 225-240.
29. Hannan, E. J., & Quinn, B. G. (1979). The determination of the order of an autoregression. Journal of the Royal Statistical Society: Series B (Methodological), 41(2), 190-195.
30. Hassan, D. B., Jiun, R. C. C., Kamu, A., & Mun, C. (2024). Analyzing The Impact of Macroeconomic Factors on Stock Market Performance in Asean-5 Countries. International Journal of Academic Research in Economics and Management Sciences, 13(1).
31. Höppner, M. (2020). The Global Trade Environment–A New Reality. The handbook of global trade policy, 23-46.
32. Kalman, M. (2019). “It requires interest, time, patience and struggle”: Novice researchers’ perspectives on and experiences of the qualitative research journey. Qualitative Research in Education, 8(3), 341-377.
33. Lasanthika, C., Wanigasuriya, K., Hettiaratchi, U., Amarasekara, T. D., & Goonewardena, C. S. E. (2023). Psychometric properties of End Stage Renal Disease-Adherence Questionnaire-Sinhalese version among patients receiving haemodialysis. Plos one, 18(10), e0292938.
34. Liew, C. Y., Mohamed, M. R., & Mzee, S. S. (2012). The repercussion of ODA on economic growth of East African country. Journal of Economics and Sustainable Prosperity, 3(12), 129-188.
35. Liew, C. Y., Mohamed, M. R., & Mzee, S. S. (2012). The repercussion of ODA on economic growth of East African country. Journal of Economics and Sustainable Prosperity, 3(12), 129-188.
36. Lopez, L., & Weber, S. (2017). Testing for Granger causality in panel data. The Stata Journal, 17(4), 972-984.
37. Lütkepohl, H., & Schlaak, T. (2018). Choosing between different time‐varying volatility models for structural vector autoregressive analysis. Oxford Bulletin of Economics and Statistics, 80(4), 715-735.
38. Martinez-Zarzoso, I. (2015). The trade effects of foreign aid: an empirical perspective. In Handbook on the economics of foreign aid (pp. 179-196). Edward Elgar Publishing.
39. Muturi, W. (2012). Effect of Foreign Inflows on Economic Growth of East African Member Countries.
40. Razali, N. M., & Wah, Y. B. (2011). Power comparisons of shapiro-wilk, kolmogorov-smirnov, lilliefors and anderson-darling tests. Journal of statistical modeling and analytics, 2(1), 21-33.
41. Refaei, R., & Sameti, M. (2015). Official prosperity assistance and economic growth in Iran. International Journal of Management, Accounting and Economics, 2(2), 125-135.
42. Rutberg, S., & Bouikidis, C. D. (2018). Focusing on the fundamentals: A simplistic contrastingiation between qualitative and quantitative research. Nephrology Nursing Journal, 45(2), 209-213.
43. Schaeffer, S. F. (2013). The impact of music listening on hospice patients' acceptance of a good death: A qualitative study of hospice caregivers' perceptions. Capella University.
44. Schmidt, P., & Sickles, R. (1975). On the efficiency of the Almon lag technique. International Economic Review, 792-795.
45. Schwarz, G. (1978). Estimating the dimension of a model. The annals of statistics, 461-464.
46. Suphian, R., & Kim, S. S. (2017). Official prosperity assistance and economic growth in East African country. 평화학연구, 18(2).
47. Taherdoost, H. (2016). Validity and reliability of the research instrument; how to test the validation of a questionnaire/survey in a research. How to test the validation of a questionnaire/survey in a research (August 10, 2016).
48. Veledinah, J. M. (2014). Impact of official development assistance on economic growth in Kenya (Doctoral dissertation, University of Nairobi).
49. Yiew, T. H., & Lau, E. (2018). Does ODA contribute to or impeded economic growth?. Journal of International Research work Vol, 11(3), 21-30.
50. YITAYEW, W. (2017). The impact of the banking sector on the real economy in Ethiopia: an Empirical Analysis (Doctoral dissertation, Addis Ababa University).
Published
2024-11-16
How to Cite
Litali, V., Opuodho, G., & Fatoki, O. (2024). Impact of Official Development Assistance on Economic Growth in the East African Community. European Scientific Journal, ESJ, 35, 215. Retrieved from https://eujournal.org/index.php/esj/article/view/18767
Section
ESI Preprints
Copyright (c) 2024 Victoria Litali, Gordon Opuodho, Olanrewaju Fatoki
This work is licensed under a Creative Commons Attribution 4.0 International License.
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