Foreign Aid, Trade Openness and Economic Performance in Sub-Saharan Africa: A Panel Cointegration Investigation

Abstract

The objective of this paper was to investigate the impact of foreign aid and trade openness on economic performance for a panel of 30 sub-Saharan African countries over the period 1970–2017 using panel cointegration techniques. The findings obtained in this paper suggest that foreign aid has contributed significantly to economic performance in SSA while trade openness has been detrimental to economic performance during the period under consideration. Also, the combined effect of aid and trade openness has enhanced economic performance. From a policy perspective, the study suggests that more should be done so that the benefits from aid inflows would result in sustained economic performance. Also, the external trade sector should be given the needed attention it deserves.

Keywords: aid, trade openness, economic performance, panel cointegration, sub-Saharan Africa

DOI: 10.7176/DCS/12-2-02

Publication date: February 28^th 2022