An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)

Sylvester Bob Hadji; Momoh Thomas Bockarie

doi:doi:10.11648/j.jim.20241302.12

Research Article |

| Peer-Reviewed

An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)

Sylvester Bob Hadji^*

, Momoh Thomas Bockarie

Published in Journal of Investment and Management (Volume 13, Issue 2)

Received: 9 September 2024 Accepted: 8 October 2024 Published: 29 November 2024

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

Sierra Leone, being a small and poor developing country, colossally relies on foreign aid, cardinally as a result of infinitesimal Gross Domestic Product (GDP) and improper resource management. The study elects to investigate and analyse foreign aid-economic growth nexus in Sierra Leone for the period 1980-2023. The study uses time series secondary data obtained from various sources such as the International Financial Statistics (IFS), Central Bank of Sierra Leone (CBSL), Ministry of Finance (MoF), World Development Indicators (WDI) and Sierra Leone Central Statistics Office (SLCSO). Various macroeconomic variables including investment to GDP ratio, exchange rate, terms of trade, inflation and public debt were specified in the model used in this study. A time series growth model was estimated using ordinary least squares (OLS) and Newey-West estimation techniques. The Hendry’s general-to-specific method was used to arrive at the estimated model. Stationarity test, using Augmented Dickey-Fullah Generalised Least Squares (ADF-GLS) and the Perron Vogelsang tests for unit root, was carried out for all variables in the model to avoid spurious regression results which are common with time series analysis of macroeconomic data using OLS technique. The study empirically reveals a positive and significant impact on economic growth in Sierra Leone for the period being investigated. The study, therefore, provides key recommendations consistent with the findings, among which, is the need for policymakers to exercise tremendous efforts to further attract foreign aid to Sierra Leone in order to boost output and economic growth, ensuring that such resources are well managed.

Published in	Journal of Investment and Management (Volume 13, Issue 2)
DOI	10.11648/j.jim.20241302.12
Page(s)	37-49
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Gross Domestic Product (GDP), Interest Rate, Inflation, Exchange Rate

References

[1]	Adepoju, A. A., A. S. Salau., and A. E. Obayelu. (2007), “The effect of external debt management on sustainable economic growth and development: Lessons from Nigeria. Munich Personal RePEC Achieve (MPRA).
[2]	Boone, P. (1994), “The impact of foreign aid on savings and growth,” Center for Economic Performance, Working Paper 1265, London.
[3]	Burnside, C. and D. Dollar (2000), "Aid, policies, and growth," American Economic Review, vol. 90, p. 847–868.
[4]	Collier, P. and A. Hoeffler. (2002). “Aid, Policy, and Growth in Post-Conflict Societies”. WB Policy Research Working Paper 2902. Washington, DC: World Bank.
[5]	Dalgaard, C. J., H. Hansen., and F. Tarp. (2004), "On the empirics of foreign aid and growth," Economic Journal, vol. 114, p. 191–216.
[6]	Easterly, W. (1999), “The Ghost of financing gap: Testing the growth model used in international financial institutions,” Journal of Development Economics 60, 423-438.
[7]	Ekanayake, E. M., and D. Chatrna. (2010) The effect of foreign aid on economic growth in developing countries, Journal of International Business and Cultural Studies, 1-13.
[8]	Fasanya, I. O., and A. B. Onakoya. (2012), Does Foreign Aid Accelerate Economic Growth? An Empirical Analysis for Nigeria; International Journal of Economics and Financial Issues Vol. 2, No. 4, 423-431 Issue: 2146-4138.
[9]	Gomanee, K., S. Girma., and O. Morrisey. (2005), "Aid and growth in Sub-Saharan Africa: accounting for transmission mechanisms," Journal of International Development, vol. 17, no. 8, 1055–1075.
[10]	Griffin, K. B. (1970), “Foreign capital, domestic savings and economic development,” Oxford University Institute of Economics and Statistics 32, 99-112.
[11]	Hansen, H. and F. Tarp. (2000), "Aid effectiveness disputed," Journal of International Development, vol. 12, 375–398.
[12]	Hatemi-J, A. & Irandoust, M. (2005). “Foreign aid and economic growth: New evidence from panel cointegration”. Journal of Economic Development, 30(1), 71-80.
[13]	Jensen, P. S., and M. Paldam. (2003), "Can the New Aid-Growth Models Be Replicated?" Working Paper No. 2003–17, Institute for Economics: Aarhus.
[14]	Karras, G. (2006), "Foreign aid and long-run economic growth: empirical evidence for a panel of developing countries," Journal of International Development, vol. 18, no. 7, 15–28.
[15]	Kargbo, P. M. (2012), “The Impact of Foreign Aid on Economic Growth in Sierra Leone”. Working Paper No. 2012/07 Helsinki UNU-WIDER.
[16]	Mallik, G. (2008), “Foreign aid and economic growth: A cointegration analysis of the six poorest African countries”, Economic Analysis and Policy, 38(2), 251-260.
[17]	Miniou, C., and S. G. Reddy (2009), “Development aid and economic growth: A positive long run relation”, The Quarterly Review of Economics and Finance, Vol. 50, Issue 1, 27-39.
[18]	Moreira, S. B. (2005), “Evaluating the impact of foreign aid on economic growth: A cross-country study”. Journal of Economic Development, 30(2), 25-49.
[19]	Nafziger, E. W. (2016), “Economic Development”, 4^thEdition. New York: Cambridge University Press.

Cite This Article

Plain Text BibTeX RIS

APA Style

Hadji, S. B., Bockarie, M. T. (2024). An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). Journal of Investment and Management, 13(2), 37-49. https://doi.org/10.11648/j.jim.20241302.12

Copy | Download

ACS Style

Hadji, S. B.; Bockarie, M. T. An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). J. Invest. Manag. 2024, 13(2), 37-49. doi: 10.11648/j.jim.20241302.12

Copy | Download

AMA Style

Hadji SB, Bockarie MT. An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). J Invest Manag. 2024;13(2):37-49. doi: 10.11648/j.jim.20241302.12

Copy | Download

@article{10.11648/j.jim.20241302.12,
  author = {Sylvester Bob Hadji and Momoh Thomas Bockarie},
  title = {An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)
},
  journal = {Journal of Investment and Management},
  volume = {13},
  number = {2},
  pages = {37-49},
  doi = {10.11648/j.jim.20241302.12},
  url = {https://doi.org/10.11648/j.jim.20241302.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20241302.12},
  abstract = {Sierra Leone, being a small and poor developing country, colossally relies on foreign aid, cardinally as a result of infinitesimal Gross Domestic Product (GDP) and improper resource management. The study elects to investigate and analyse foreign aid-economic growth nexus in Sierra Leone for the period 1980-2023. The study uses time series secondary data obtained from various sources such as the International Financial Statistics (IFS), Central Bank of Sierra Leone (CBSL), Ministry of Finance (MoF), World Development Indicators (WDI) and Sierra Leone Central Statistics Office (SLCSO). Various macroeconomic variables including investment to GDP ratio, exchange rate, terms of trade, inflation and public debt were specified in the model used in this study. A time series growth model was estimated using ordinary least squares (OLS) and Newey-West estimation techniques. The Hendry’s general-to-specific method was used to arrive at the estimated model. Stationarity test, using Augmented Dickey-Fullah Generalised Least Squares (ADF-GLS) and the Perron Vogelsang tests for unit root, was carried out for all variables in the model to avoid spurious regression results which are common with time series analysis of macroeconomic data using OLS technique. The study empirically reveals a positive and significant impact on economic growth in Sierra Leone for the period being investigated. The study, therefore, provides key recommendations consistent with the findings, among which, is the need for policymakers to exercise tremendous efforts to further attract foreign aid to Sierra Leone in order to boost output and economic growth, ensuring that such resources are well managed.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)

AU  - Sylvester Bob Hadji
AU  - Momoh Thomas Bockarie
Y1  - 2024/11/29
PY  - 2024
N1  - https://doi.org/10.11648/j.jim.20241302.12
DO  - 10.11648/j.jim.20241302.12
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 37
EP  - 49
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20241302.12
AB  - Sierra Leone, being a small and poor developing country, colossally relies on foreign aid, cardinally as a result of infinitesimal Gross Domestic Product (GDP) and improper resource management. The study elects to investigate and analyse foreign aid-economic growth nexus in Sierra Leone for the period 1980-2023. The study uses time series secondary data obtained from various sources such as the International Financial Statistics (IFS), Central Bank of Sierra Leone (CBSL), Ministry of Finance (MoF), World Development Indicators (WDI) and Sierra Leone Central Statistics Office (SLCSO). Various macroeconomic variables including investment to GDP ratio, exchange rate, terms of trade, inflation and public debt were specified in the model used in this study. A time series growth model was estimated using ordinary least squares (OLS) and Newey-West estimation techniques. The Hendry’s general-to-specific method was used to arrive at the estimated model. Stationarity test, using Augmented Dickey-Fullah Generalised Least Squares (ADF-GLS) and the Perron Vogelsang tests for unit root, was carried out for all variables in the model to avoid spurious regression results which are common with time series analysis of macroeconomic data using OLS technique. The study empirically reveals a positive and significant impact on economic growth in Sierra Leone for the period being investigated. The study, therefore, provides key recommendations consistent with the findings, among which, is the need for policymakers to exercise tremendous efforts to further attract foreign aid to Sierra Leone in order to boost output and economic growth, ensuring that such resources are well managed.

VL  - 13
IS  - 2
ER  -

Copy | Download

Author Information

Sylvester Bob Hadji

Department of Economics and Commerce, Fourah Bay College-University of Sierra Leone, Freetown, Sierra Leone

Contact Email

http://orcid.org/0009-0005-5639-9190
Momoh Thomas Bockarie

Development Economist, Impact Matters (Public and Private Sector Consulting), Freetown, Sierra Leone

Contact Email

http://orcid.org/0009-0004-9103-9804

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Hadji, S. B., Bockarie, M. T. (2024). An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). Journal of Investment and Management, 13(2), 37-49. https://doi.org/10.11648/j.jim.20241302.12

Copy | Download

ACS Style

Hadji, S. B.; Bockarie, M. T. An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). J. Invest. Manag. 2024, 13(2), 37-49. doi: 10.11648/j.jim.20241302.12

Copy | Download

AMA Style

Hadji SB, Bockarie MT. An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023). J Invest Manag. 2024;13(2):37-49. doi: 10.11648/j.jim.20241302.12

Copy | Download

@article{10.11648/j.jim.20241302.12,
  author = {Sylvester Bob Hadji and Momoh Thomas Bockarie},
  title = {An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)
},
  journal = {Journal of Investment and Management},
  volume = {13},
  number = {2},
  pages = {37-49},
  doi = {10.11648/j.jim.20241302.12},
  url = {https://doi.org/10.11648/j.jim.20241302.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20241302.12},
  abstract = {Sierra Leone, being a small and poor developing country, colossally relies on foreign aid, cardinally as a result of infinitesimal Gross Domestic Product (GDP) and improper resource management. The study elects to investigate and analyse foreign aid-economic growth nexus in Sierra Leone for the period 1980-2023. The study uses time series secondary data obtained from various sources such as the International Financial Statistics (IFS), Central Bank of Sierra Leone (CBSL), Ministry of Finance (MoF), World Development Indicators (WDI) and Sierra Leone Central Statistics Office (SLCSO). Various macroeconomic variables including investment to GDP ratio, exchange rate, terms of trade, inflation and public debt were specified in the model used in this study. A time series growth model was estimated using ordinary least squares (OLS) and Newey-West estimation techniques. The Hendry’s general-to-specific method was used to arrive at the estimated model. Stationarity test, using Augmented Dickey-Fullah Generalised Least Squares (ADF-GLS) and the Perron Vogelsang tests for unit root, was carried out for all variables in the model to avoid spurious regression results which are common with time series analysis of macroeconomic data using OLS technique. The study empirically reveals a positive and significant impact on economic growth in Sierra Leone for the period being investigated. The study, therefore, provides key recommendations consistent with the findings, among which, is the need for policymakers to exercise tremendous efforts to further attract foreign aid to Sierra Leone in order to boost output and economic growth, ensuring that such resources are well managed.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - An Empirical Investigation and Analysis of Foreign Aid- Economic Growth Nexus in Sierra Leone (1980-2023)

AU  - Sylvester Bob Hadji
AU  - Momoh Thomas Bockarie
Y1  - 2024/11/29
PY  - 2024
N1  - https://doi.org/10.11648/j.jim.20241302.12
DO  - 10.11648/j.jim.20241302.12
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 37
EP  - 49
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20241302.12
AB  - Sierra Leone, being a small and poor developing country, colossally relies on foreign aid, cardinally as a result of infinitesimal Gross Domestic Product (GDP) and improper resource management. The study elects to investigate and analyse foreign aid-economic growth nexus in Sierra Leone for the period 1980-2023. The study uses time series secondary data obtained from various sources such as the International Financial Statistics (IFS), Central Bank of Sierra Leone (CBSL), Ministry of Finance (MoF), World Development Indicators (WDI) and Sierra Leone Central Statistics Office (SLCSO). Various macroeconomic variables including investment to GDP ratio, exchange rate, terms of trade, inflation and public debt were specified in the model used in this study. A time series growth model was estimated using ordinary least squares (OLS) and Newey-West estimation techniques. The Hendry’s general-to-specific method was used to arrive at the estimated model. Stationarity test, using Augmented Dickey-Fullah Generalised Least Squares (ADF-GLS) and the Perron Vogelsang tests for unit root, was carried out for all variables in the model to avoid spurious regression results which are common with time series analysis of macroeconomic data using OLS technique. The study empirically reveals a positive and significant impact on economic growth in Sierra Leone for the period being investigated. The study, therefore, provides key recommendations consistent with the findings, among which, is the need for policymakers to exercise tremendous efforts to further attract foreign aid to Sierra Leone in order to boost output and economic growth, ensuring that such resources are well managed.

VL  - 13
IS  - 2
ER  -

Copy | Download