Abstract
A recent study of 36 Sub Saharan African countries found a positive impact of aid
in the absolute majority of these countries. However, for Tanzania and Ghana, two
major aid recipients, aid did not seem to have been equally bene…cial. This paper
singles out these two countries for a more detailed empirical investigation. The focus is now on the effect of aid when allowing external and nominal facors to play a role in the maccroeconomic transmission mechanism. We conclude that aid played a signi…cantly positive - but very different - role in the two countries. Due in part to generous aid infl‡ows Tanzania experienced positive investment and GDP growth from the late 1960s to 2007. But, until the mid-1980s, the impact of aid on growth was well below its potential as the large in‡ows of aid facilitated a serious overappreciation of the real exchange rate. In Ghana, declining aid in the 1970s was associated with lacking growth while the reactivation of aid ‡ows in the 1980s supported an economic rebound. When monetary and external factors are properly accounted for, we …nd that aid has been pivotal to growth in both real GDP and investment.
in the absolute majority of these countries. However, for Tanzania and Ghana, two
major aid recipients, aid did not seem to have been equally bene…cial. This paper
singles out these two countries for a more detailed empirical investigation. The focus is now on the effect of aid when allowing external and nominal facors to play a role in the maccroeconomic transmission mechanism. We conclude that aid played a signi…cantly positive - but very different - role in the two countries. Due in part to generous aid infl‡ows Tanzania experienced positive investment and GDP growth from the late 1960s to 2007. But, until the mid-1980s, the impact of aid on growth was well below its potential as the large in‡ows of aid facilitated a serious overappreciation of the real exchange rate. In Ghana, declining aid in the 1970s was associated with lacking growth while the reactivation of aid ‡ows in the 1980s supported an economic rebound. When monetary and external factors are properly accounted for, we …nd that aid has been pivotal to growth in both real GDP and investment.
| Original language | English |
|---|---|
| Place of Publication | Kbh. |
| Publisher | Økonomisk institut, Københavns Universitet |
| Number of pages | 32 |
| Publication status | Published - 2014 |
| Series | University of Copenhagen. Institute of Economics. Discussion Papers (Online) |
|---|---|
| Number | 02 |
| Volume | 2014 |
| ISSN | 1601-2461 |