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The long‐run relationship between ODA, growth and governance: An application of FMOLS and DOLS approaches
Author(s) -
Yahyaoui Ismahene,
Bouchoucha Najeh
Publication year - 2021
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12489
Subject(s) - economics , corporate governance , development economics , economic system , finance
Despite having received a significant amount of foreign aid for several decades, Africa is among the poorest regions in the world. This study examines the relationship between foreign aid, economic growth and governance in the African region during the period 1996–2014 by fully applying both DOLS and FMOLS techniques. In the first stage of this study, we examine the foreign aid effect on economic growth. In the second stage, we assess the intermediary role of institutions in the relationship between foreign aid and economic growth in the African countries. It was found that foreign aid has a negative effect on economic growth in African countries in both FMOLS and DOLS models. However, empirical results indicate that foreign aid improves economic growth in the presence of good institutional quality only in the DOLS model.