Foreign Development Assistance and Macroeconomic Policy Stance: The Underlying Levers of Growth in Emerging SSA Countries

Abstract

The role of foreign development assistance and macroeconomic policy stance, in economic growth performance of the emerging Sub-Saharan African economies, is investigated in this study. The GMM and VECM methods are employed in estimating the relationships and impacts, for the period 1980-2019. Results from the two estimation methods are comparable and consistent. The effect of foreign development assistance is revealed to be positive, and more significant than that of monetary policy, but less significant than fiscal policy. The control variable, exchange rate, exerts significant negative effect on growth. The results also reveal that economic growth is unable to significantly reinforce itself. Generally, the estimation results conform to theoretical expectations of the relationships that exist between economic growth and the underlying variables. The results are also considered to be significantly reliable for forecasting and policy making.