Aid, macroeconomic policy environment and growth: evidence from Sub-Saharan Africa

This paper is a contribution to the growing debate on aid-growth nexus. It examines the role of macroeconomic policy environment in aid-growth nexus an area which has received less attention in Sub-Saharan Africa (SSA). In a panel regression model covering twenty Sub-Saharan African countries, estimated with the use of OLS and 2SLS over the period 1970 to 2001 (in nine-four year sub-periods), the study finds that a sound macroeconomic environment is fundamental for the effective contribution of aid to sustainable growth. The results also show that macroeconomic policy environment is an important determinant of growth. Overall, the paper concludes that the macroeconomic instability and poor institutional framework have crippled the growth of aid recipients in SSA. Reprinted by permission of Applied Economics Research Centre