Political Regimes and Foreign Aid Effectiveness in Ghana

Posted: 20 May 2020

See all articles by Vincent Tawiah

Vincent Tawiah

Griffith University; University of Mysore - Department of Commerce; University of Cape Coast; Dublin City University Business School

John Banns

University of Mysore

Date Written: January 24, 2019

Abstract

Purpose – This paper has examined the effectiveness of foreign aid on Ghanaian economy under different political regimes.

Design/methodology/approach – Using vector error correction and co-integration models on the annual data set over a period of 35 years, the authors demonstrate that foreign aid has had varied impacts on economic growth depending on the political ideology of the government in power.

Findings – With capitalist political philosophy, foreign aid improves private sector growth through infrastructural development. On the other hand, a government with socialist philosophy applies most of its foreign aid in direct social interventions with the view of improving human capital. Thus, each political party is likely to seek foreign aid/grant that will support its political agenda. Overall, the results show that foreign aid has a positive impact on the growth of the Ghanaian economy when there is good macroeconomic environment.

Practical implications – This implies that the country experiences economic growth when there are sound economic policies to apply foreign aid.

Originality/value – The practical implication of the findings of this paper is that donor countries and agencies should consider the philosophy of the government in power while granting aid to recipient countries, especially in Africa. The results are robust to different proxies and models.

Keywords: Africa, Growth, Aid, Effectiveness, Regime

JEL Classification: O011, O055

Suggested Citation

Tawiah, Vincent and Banns, John, Political Regimes and Foreign Aid Effectiveness in Ghana (January 24, 2019). Available at SSRN: https://ssrn.com/abstract=3393244

Vincent Tawiah (Contact Author)

Griffith University ( email )

PMB 50
Gold Coast Queensland 9726
Australia

University of Mysore - Department of Commerce ( email )

Mysore
India

University of Cape Coast ( email )

PMB, UCC, GHANA
Department of English
Cape Coast, Central Region
Ghana

HOME PAGE: http://ucc.edu.gh

Dublin City University Business School ( email )

Dublin 9
Ireland

John Banns

University of Mysore

Mysore
Karnataka
Manasagangotri, karnataka 570006
India

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