Exploring the Effect of Foreign Aid on Economic Growth in Ghana

Date
2022-05
Authors
Quarshie, Eileen
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Abstract
Developing countries, including Ghana, rely on foreign aid to assist in the development of their economy. However, despite the substantial increase in the foreign aid inflows, the country experiences unsatisfactory economic growth. This study employs an updated and wider range of data to assess the effect of foreign aid on the economic growth in Ghana. This study used the Ordinary Least Squares Regression model , using data from the World Bank's World Development Indicators spanning from the year 1979 to the year 2021. This study found foreign aid (Net ODA) to be insignificant to the economic growth (GDP) in Ghana. However, the other kinds of cash inflows FDI and RI were significant and had a positive relationship on the economic growth in Ghana. Although control variables such as General Government Final Consumption Expenditure (GXP) and External Debt Stocks (ED) were not significant to the model, Fixed Capital Formation (CAP) had a positive effect on the economic growth in Ghana and was also found to be statistically significant. With regards to the findings, the government should limit the amount of foreign aid received into the country as it has no significance on the economic growth. Policies that will increase savings and investment in the country should be enforced and finally make the resources available to the citizens create jobs, which will increase Gross Domestic Product(GDP), leading to an increase in economic growth.
Description
Undergraduate Thesis submitted to the Department of Business Administration, Ashesi University in partial fulfillment of the requirement for the award of Bachelor of Science degree in Business Administration
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Citation
Quarshie, E. (2022). Exploring the Effect of Foreign Aid on Economic Growth in Ghana. Ashesi University, Berekuso. 47pgs.