This article examines the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African (SSA) countries for the period 1983-2014. Findings from the system-generalised methods of moments (GMM) show that, while foreign aid significantly drives sectoral growth, aid volatility deteriorates sectoral value additions impacting heavily on non-tradable sectors with no apparent effect on the agricultural sector. The deleterious effect of aid volatility on sectoral value additions in SSA is weakened by a well-developed financial system with significant impact on the tradable sector. Evidently, development of domestic financial markets enhances aid effectiveness.
Kumi, E., Ibrahim, M., & Yeboah, T. (2017). Aid, Aid Volatility and Sectoral Growth in subSaharan Africa: Does Finance Matter? Journal of African Business, 18(4), 435-456. https://doi.org/10.1080/15228916.2017.1363358