"Ethnicity, Foreign Aid, and Economic Growth in Sub-Saharan Africa: The Case of Kenya," Papers 520, Harvard - Institute for International . there is a positive impact of foreign aid to economic growth. Foreign aid donors hope that . The study concludes that in Kenya population . This paper investigates the impact of foreign aid on investment and economic growth of Ethiopia for the period 1971-2010. Econometrics Analysis 6.1 Foreign Aid and Economic Growth The late 1960s and early 1970s were periods of remarkable economic growth and structural transformation in Kenya. for displacement effects of African firms due to competition from China. PDF Does foreign aid contribute to or impeded economic growth? This paper analyzes the impact of foreign aid on economic growth in developing countries. Title: Microsoft Word - CP0605.doc Author: user Created Date: 11/27/2006 9:57:27 AM In recent years, the government of South Africa and Kenya have both enacted policies to entice Foreign Direct Investment (FDI) in the view Our estimates imply that exogenous aid shocks exert positive impact on economic growth. THE EFFECT OF FOREIGN AID ON ECONMIC GROWTH AND CORRUPTION IN 67 DEVELOPING COUNTRIES Vanarith Chheang, B.B.A Thesis Advisor: David Newman, Ph.D. ABSTRACT This study examines the effect of foreign aid on economic growth and corruption in developing countries. Viewed in broader terms, Kenya's economy has not Between late . In the progression towards economic growth, countries consider investment as a critical feature in raising productivity levels by boosting technological progress and reducing the unemployment rate. Aze (2019) carried out a study on the impact of foreign direct investment on manufacturing sector output in Nigeria. The study questioned the contribution of foreign aid on the development and recurrent expenditure as one of the source of funds, apart from net external finance and Government revenue; which most prior empirical works did not mention. one important growth theory which explains the relationship between foreign aid and economic growth is the two-gap model, pioneered by chenery and strout [ 7] who advocate that foreign aid can help bring a positive contribution to the economic performance of recipient countries by supplementing domestic savings and export earnings through … Foreign Aid and Growth. The result indicates that foreign aid has a statistically significant positive impact on domestic investment, while aid's positive impact on per capita GDP growth does not depend on any macroeconomic policy conditionality. On the other hand, Rutarou and Ueta (2009) supported the results of Asteriou that, aid had a positive impact of economic growth in Tanzania. Private investment relates to government investment and imports negatively, but positively to foreign aid. Foreign aid and Economic Growth in sub-Sahara Africa 5.1 Trends in Foreign Aid Inflows into sub-Sahara Africa 5.2 Trends in Regional shares of total Foreign Aid (1990-2017) 5.3 Trend in Net ODA growth rate and GDP growth rate of SSA. growth and found results of economic significance. The first chapter provides a brief explanation of the historical and economic development Kenya has experienced since independence. Previous empirical studies on foreign aid and economic growth generate mixed results. The impact of foreign direct investment, foreign aid and trade on poverty reduction: Evidence from Sub-Saharan African countries Friday Osemenshan Anetor1*, Ebes Esho2 and Grietjie Verhoef2 Abstract: Despite postulations on the effects of foreign direct investment (FDI), foreign aid, and trade on growth, empirical evidence from extant research . As a result, the core objective of this study is to look at the impact of foreign aid on economic growth of Ethiopia using annual time series data from 1969/70 to 2010111. This paper examines the effect of fiscal variables (government expenditure and revenue) and aid on growth using annual time series data for Kenya over the period 1964 - 2002. poverty is due to the contribution made by foreign aid funds in Tanzania. Budget spending plans in Uganda have been adjusting to tax revenues. INVESTIGATING THE IMPACT OF FDI ON ECONOMIC GROWTH IN ZAMBIA: 1980 - 2012 Eugene Maliwa & Jacob M. Nyambe Department of Economics, University of Namibia P/Bag 13301, Windhoek, Windhoek, NAMIBIA ABSTRACT This study was conceived to investigate the impact of foreign direct investment on economic growth in Zambia. Keywords: China, Sub-Saharan Africa, Trade, FDI, Economic Growth, South-South Cooperation JEL Classification: F14, F23, O47 foreign aid on economic growth is a function of aid levels and the stability of aid flows. 5. ABSTRACT. impact positively to the economic growth in the country. That's why the value of foreign aid is such a powerful economic generator. It was also found that foreign direct investment was more . Cohen, J.M., 1995. The analysis is based on the Dutch disease model and the real exchange rate theory. foreign aid on economic growth. Cieşlik and Tarsalewska (2008)looks at both trade and FDI among the CEE countries and gets a positive effect on economic growth. Foreign aid can increase local prices. But the impact of foreign aid seems to be far from being felt in Kenya as evidenced by unimpressive GDP growth rates and entrenching poverty. However, the relationship or effect of foreign aid on . Development assistance is also associated with reduced domestic borrowing in Uganda. Researchers [10, 40, 41, 54] suggest that foreign aid helps to improve the economy positively, while other scholars [7, 8, 28], assert that foreign aid has a negative impact on economic growth, and finally, other studies [1, 18] propose it has no significant effect on economic growth. The studyusedannual data covering for the period of 1992-2014. and investment. In this study, I use the Solow . This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. FOREIGN AID TO KENYA T his section provides a brief overview of in-ternational aid to Kenya. 1. Over 2015-2019, Kenya's economic growth averaged 5.7%, making it one of the fastest growing economies in Sub-Saharan Africa. This is against the backdrop that Eyben ed., Relationships for Aid. This, however, was inadequate to offset the negative impact of the factors noted above. However, aid in the form of net external loans is found to have a significant negative impact on long run growth. As found in other country studies, aid leads to higher government spending in Kenya. ABSTRACT The aim of this study is to evaluate the impact of foreign aid on development in Kenya. It is found that foreign aid has a positive impact on economic growth rate. from China. Using panel data from 67 countries from 1986-2005, in two fixed effect economic growth. Foreign aid is a significant element of Uganda's long-run fiscal system. This study investigated the impact foreign direct investment volatility on growth in Kenya using time series data spanning 1970 to 2011. Economic Growth of Kenya;Economic growth in Kenya has been steadily growing since the country gained independence in 1963. The study by Abeba (2002) in Ethipia for example shows that aid has negative impact on economic growth while the study by Tasew (2010) and Yohannes (2011) found that aid has positive impact on economic growth. 1.3 Objectives of the study This study seeks to: i. (2004) distinguish between short-impact aid and long-impact aid and find a strong and positive One purpose of the report is to investigate whether foreign aid improves the efficiency of resource use in a country in the short term. Chinese foreign investment and aid in Africa does not have an impact on growth. External debt accumulation has been rising over the years with debt burden indicators increasing . This study focused on the relationship between foreign aid and economic growth in Kenya. Due to this lack of general consensus the effectiveness of foreign aid for economic… Expand 9 PDF View 1 excerpt, references background Foreign Assistance and Economic Growth in Nigeria : The Two-Gap Model Framework Until the COVID-19 pandemic, Kenya was one of the fastest growing economies in Africa, with an annual average growth of 5.9% between 2010 and 2018. However, in accordance with much research on aid fungibility, some aid finances general government spending rather than targeted development activities. The aim of the paper was to determine the extent to which FDI inflows in the infrastructure sector, the manufacturing sector and the agricultural sector impact Kenya's economic growth. The study will investigate the effect that foreign aid has had on development, appraising its benefits as well as exposing its shortcomings. Aid is associated with increased tax collection effort and public spending in Uganda. The World Economic Forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. sector, the impact on economic growth was insignificant while in the agriculture sector, the impact was found to be significant and since it‟s a growing economy. Mosely, Hudson, and Horrel (1987), using aggregate, cross-sectional data, report a negative and significant relationship for the period 1960-1970, but a negative and This study explores this question in the Kenyan context. It appears as though most African countries are so dependent on aid that without it almost half of their yearly budgetary commitments cannot be fulfilled. There is therefore need to determine how aid translates to growth in Kenya. The review aims to aid the purpose of this study in its quest to understand the linkage between FDI flows in developing countries and economic growth, and ergo the likelihood and extent to which FDI-attracting instruments such as the special economic zones in Kenya may impact on the country‟s economic growth. 32 Growth Model's aggregate production function as a guide to structure my regression model. However, the impact was found to be modest. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. Applying a difference-in-difference model to data from 69 districts, the results generally show that ODA has significantly reduced poverty in Kenya. In this study, based standard neoclassical growth model, the equations for growth have been specified. The result was a significant decline in the rate of economic growth. The history of economic management in . economic growth in Kenya, this study notes that foreign aid inflows have been huge in Kenya and therefore should have been included in their model. Focusing on the 35 countries that have crossed the income threshold from below between 1987 and 2010, a positive, statistically significant, and economically sizable effect of aid on growth is found. did not need to rely heavily on foreign aid.The year 2008 saw a decline in aid from China due to the troubled political elections of 2007 December which saw the nation of Kenya descend into Chaos. The study suggests that: Rather, aid effectiveness depends on the peculiar . The dissertation had three objectives as follows: to establish the impact of emergency aid to economic growth, to examine the effects of concessional loans to economic growth and finally to evaluate the impact of grants to economic growth in Kenya. Surprisingly, perhaps, there are very few country studies of aid effectiveness, and none of which we are aware that adopt a time series econometric approach to analyzing the impact of aid on growth. ECONOMIC GROWTH IN KENYA (1984-2013) Isaac Chege SODeL, Jomo Kenyatta University of Agriculture and Technology, Kenya isaac.chege10@yahoo.com Abstract This study looked into the impact of Foreign Direct Investments on economic growth in Kenya from the year 1984 to 2013 .The dependent variable in this study was economic growth while It also found that economic growth in sub-Saharan Africa directly correlated with the increase in foreign aid from 1970 to 2012. The fundamental contribution that foreign aid can bring to the recipient country is economic growth and development, which in turn can reduce pov-erty. Foreign aid is a modern joystick used to play a modern game called the African economy! Although recognizing that economic growth still plays a significant role in increasing people's standard of living, this parallel body of research adopts a broader measure of development that captures more than the rise and fall of national income (Lohani 2004). Foreign aid is an important topic given its implications for poverty reduction in developing countries. This study examines the impact of foreign direct investment (FDI) on economic growth and its determinants in East African countries. The finding that aid has direct impact on growth in the structural model and that investments drive growth implies that aid is usually not invested but instead it is channeled to other expenses. This study examines the impact offoreign aid on economic growth in Kenya using time series data for the period 1970 - 2008 using a modified Harrod Domar growth model. As a region, Africa accounts for around 20 percent of U.S. aid, with Egypt, Kenya, and South Sudan being the biggest beneficiaries. With a GDP of $95 billion, Kenya recently reached lower-middle income status, and has successfully established a diverse and dynamic economy. The impressive growth performance was attributed mainly to land reforms and import substitution industrialization strategy (Republic of Kenya, 1989, p. 4). Foreign Aid and Human Development This chapter is an attempt to fill that gap, through a study of Kenya over the period 1964-2002. On the other hand, developing economies would have to export more, receive foreign aid or borrow overseas to They also controlled for a number of policy variables such as 1 For a more detailed, critical survey of the aid-growth literature, see White (1992). The objective of this paper is to study the impact of foreign aid on the economic growth of some least developed countries (LDCs) in Sub-Saharan Africa. The impact of foreign aid in donor and recipient countries is largely unsettled in theory and data analysis and this is because of the various arguments for and against the benefits of foreign aid.5 Many economists believe that foreign aid is synonymous to economic growth because it complements and supplements He found that foreign aid contributed to economic growth between 1970 and 1980 in LDC. Error Correction Model (ECM) was employed to determine the. This paper assesses the heterogeneous impacts of aid on growth in a low income country with different aid unpredictability episodes and finds that increased aid unpredictability weakens economic growth in Kenya. THE IMPACT OF POPULATION CHANGE ON ECONOMIC GROWTH IN KENYA Gideon Kiguru Thuku¹, Gachanja Paul² and Obere Almadi3 . When foreign aid is offered at any left, the goal is to help that nation create their own resource chain that can be used to create the essentials of life: food, water, clothing, and shelter. The study of Alvi and Senbeta (2012) though shows that foreign aid inflows result in poverty alleviation, however, it does not appear to contribute to economic growth. Foreign aid and the planning approach to economic development: 1950-1982 During 1960s and 1970s most development economists were skeptical about markets, and believed that in poor countries some form of planning had to guide resource allocation. A gamut of literature exists on the effects of foreign aid on economic growth. The COVID-19 shock has hit Kenya's economy hard through supply and . Similarly, Singh (1985), Hadjimichael et al. This paper analyses the Impact of foreign aid economic growth of Tanzania. In 2015, a study that the University of Western Australia conducted concluded that foreign aid had a significant and long-term positive impact on GDP growth in the 25 countries it examined. We find that this positive effect of foreign aid on economic growth exists despite patronage, as aid is used to fund public employment and is disproportionately spent in the region of birth of the incumbent. It gives a feel of the magnitude and signifi cance of aid to the country by comparing it to global trends. Abstract Purpose: The official development assistance, in form of foreign aid and economic growth relationship is investigated for a panel of South and East Asian countries for the period 1995-2013. Levy (1988) investigated the impact of aid on economic growth in Sub-Saharan African and concluded that a positive relationship exists between aid and economic growth. List of the Cons of Foreign Aid. Economic Bulletin, 15: 14: 1-14 shadowed by macro-economic 'buzzwords' in the Eyben R (2006). Foreign Aid and Growth, Page 2 Introduction The role of foreign aid in the growth process of developing countries has been a topic of intense debate. Clemens et al. All developing countries, especially in sub-Saharan Africa, are faced with low savings and a narrow lent widening tax base. for aid effectiveness. A great deal of the literature on aid, its effectiveness, and its impact concentrates on sub-Saharan Africa, which is compounded by the fact that East Asian developing countries started their rapid growth as early as the 1960s and ceased to receive foreign aid in that period. Although critics argue that lowered public international . A great deal of the literature on aid, its effectiveness, and its impact concentrates on sub-Saharan Africa, which is compounded by the fact that East Asian developing countries started their rapid growth as early as the 1960s and ceased to receive foreign aid in that period. After carrying out a regression analysis on the model, the study establishes that aid causes a negative effect on economic expansion. INTRODUCTION This study examines the relationship between foreign aid inflows to Tanzania and some macro- economic variables such as the real exchange rate, export performance, manufacturing produc- tion, and growth. This paper examines the structure of Kenya's external debt and its implications on economic growth.The findings of the study indicate that Kenya's external debt is mainly official, of which a bigger proportion is from multilateral sources. Secondary data for 20 years for 14 Sub-Saharan Africa countries was collected from the World Bank's World Development Indicator database, the World Governance Indicator and political Risk Services International . To estimate the impact of foreign aid on the economic growth of Kenya ii. into Pakistan. Primary sources were provided by the Kenyan Embassy to the U.S.A., Kenya tourist offices in the U.S.A. and West Germany, the Economics Department at the University of Nairobi, the Ministry of Finance in Kenya, the Institute of South Africa, and the United Nations. Burnside and Dollar (2000) suggested that good fiscal . The impact has been higher for the 'poorest of the poor' and less on those just below the poverty line. Keywords: China, Sub-Saharan Africa, Trade, FDI, Foreign Aid, Economic Growth, South-South Cooperation JEL Classification: F14, F23, F35, O47 In a study, Adamu (2013) Recent studies have shown that foreign aid can have either a positive or a negative impact on economic growth. Using later data Dowling and Hiemenz (1983) tested the aid-growth relationship for the Asian region on 13 countries using pooled data and found a positive and significant impact of aid on growth. Incorporated as a not-for-profit foundation in 1971, and headquartered in Geneva, Switzerland, the Forum is tied to no political, partisan or national interests. Through both fixed-effects and robust least squares estimators, we study the cross-section time-series data for a group of 37 developing countries consisting of low income, lower middle income, and upper middle-income groups over the period from 1985 to 2018. The study analyzed the impact of foreign aid on economic growth in Tanzania. During the analyzed period, Kenya received large inflows of foreign assistance. For example, in 1992, aid accounted for 12.4% of gross national product (GNP), over 70% of gross . Evidently, the flow of foreign aid influences government spending patterns. To evaluate the effect of Foreign aid on economic growth of Rwanda, we attempt to improve model specification further by examining the growth impact of foreign aid within a model involving both policy variables and all the major sources of investment finance - foreign aid, private and other inflows, and domestic With a large portion of foreign aid injected in the Sub-Saharan Africa, we expect to see much improvement in the aggregate growth and standards of living in the region. Bounds testing approach was employed to show that FDI volatility retards long-run economic growth in Kenya. This SADEV Report is part of the wider project theme: Foreign aid, economic growth and efficiency development, and is the first of a series of studies investigating aid effectiveness in a production theory context. Theoretical predictions and empirical evidence on the impact of foreign aid and fiscal policy on growth are mixed. A summary of this has been well documented by Hansen and Tarp (2001) and Doucouliagos and Paldam (2006). He finds that every percentage point increase in the growth of trade leads to an economic growth5 rise by slightly more than one-fifth of a percentage point. (1995) found a positive significant impact of foreign aid on recipient's economic growth. Chinese foreign investment and aid in Africa do not seem to have an impact on growth. Economic growth, trade policy and trade openness in Kenya. Making Relationships Matter for Aid Bureaucracies" in development literature. Overall, aid as a share of gross national income (GNI) drops about 59 percent on average after countries cross the threshold. Aid is not sufficient to balance Uganda's budget. Abstract. An endogenous growth model was estimated using the ordinary least squares to determine the relationship between the FDI volatility and economic growth. The performance of the economy has been boosted by a stable macroeconomic environment, positive investor confidence and a resilient services sector. economic growth rates being noticed in 1960s and beginning 1970 before economic performance started declining in the mid-1970.Between 1974 and 1993, real GDP started reducing since the bilateral and multilateral aid was cut due to mismanagement of 6. The impact of foreign direct investment, foreign aid and trade on poverty reduction: Evidence from Sub-Saharan African countries Friday Osemenshan Anetor1*, Ebes Esho2 and Grietjie Verhoef2 Abstract: Despite postulations on the effects of foreign direct investment (FDI), foreign aid, and trade on growth, empirical evidence from extant research .