This study aims at understanding the impact of foreign aid on the economic growth of the Sub Saharan African region. Despite being the largest foreign aid recipient in the world, the region is the poorest with the lowest Human Development Index (HDI) and Gross National Income (GNI) per capita. This raises serious questions about the effectiveness of foreign aid to the economic growth and development of the region. As such, we examine the relationship between foreign aid, determined by the official development assistance (ODA), and the economic growth rate of the Sub Saharan Africa's ten largest recipients of foreign aid, for a 23-year period from 1990 to 2012. These ten countries include Ethiopia, the Democratic Republic of Congo, Tanzania, Kenya, Côte d'Ivoire, Mozambique, Nigeria, Ghana, Uganda and Malawi. We find that aid by itself does not have significant impact on economic growth. However, the variable aid interacted with the policy index was found to be statistically significant and positive, which means that aid tends to increase growth rate in a good policy environment. Subsequently, when we include the institutional quality index and its interaction term in the model, we find that institutional quality has a positive and significant impact on growth; however, none of the aid variables was significant. We also test the two-gap growth model which states that foreign aid enhances economic growth through investment and imports. The results show that foreign aid is a good ingredient for supplementing investment and imports requirements in these ten countries. We believe that given foreign aid is conditional on the economic, political and institutional environment of the recipient country, this can explain why aid effectiveness is insignificant in the Sub Saharan Africa region where bad governance is a core issue on the region. Therefore, respective governments, donor agencies, and policy makers should take into consideration these multiple aspects when undertaking aid-financing activities.
This paper aims to demonstrate the superiority of Extended Mean-Gini (EMG) framework which is consistent with the second-order of stochastic dominance theory. The study provides a comprehensive analysis of investors' distinct risk averse behavior towards optimal futures hedging strategy. The empirical distribution function method and the more efficient kernel estimation method are employed in the estimation of EMG hedge ratios. Furthermore, the moving data window procedure is used to examine the stability of the dynamic hedge ratios. The research is conducted on Malaysian Crude Palm Oil and CPO Futures markets for the period of 16th March 1995 to 28th June 2011. The empirical results show that the EMG approach is apparently more appropriate than the MV approach where EMG framework incorporates the risk aversion factor. The study also shows the instability of dynamic hedge ratios across time horizons hence not favorable to investors who adopt the "buy and hold" strategy.
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