Political regimes and foreign aid effectiveness in Ghana
International Journal of Development Issues
ISSN: 1446-8956
Article publication date: 1 October 2018
Issue publication date: 20 March 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
Citation
Tawiah, V.K., Barnes, E.J., Acheampong, P. and Yaw, O. (2019), "Political regimes and foreign aid effectiveness in Ghana", International Journal of Development Issues, Vol. 18 No. 1, pp. 15-33. https://doi.org/10.1108/IJDI-02-2018-0029
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited