Foreign Aid, Terrorism and Growth: Conditional Evidence from Quantile Regression

In this study, we investigate the role of development assistance in reducing a hypothetically negative impact of terrorism on economic growth, using a panel of 78 developing nations with data for the period 1984-2008. The empirical evidence is based on interactive Quantile regressions. Domestic, transnational, unclear and total terrorism dynamics are employed while development assistance measurements comprised: bilateral and multilateral aid variables. With regard to the investigated hypothesis, we consistently confirm that: (i) In quantiles where terrorism is found to increase (decrease) economic growth, its interaction with foreign aid decreases (increases) economic growth. (ii) Comparing thresholds of the modifying aid variables for which the hypothesis is either rejected or accepted reveals that higher levels of multilateral (bilateral) aid are needed to reverse the negative effect of total (unclear) terrorism on growth, than the quantity needed to reverse the positive impact of transnational (domestic and total) terrorism(s) on growth. (iii) There is scant evidence of positive net effects. Overall the findings broadly indicate that foreign aid is a necessary but not a sufficient policy tool for completely dampening the effects of terrorism on economic growth

Foreign Aid and Governance in Africa

Purpose – This paper investigates the effect of foreign aid on governance in order to extend the debates on foreign aid and to verify common positions from Moyo’s ‘Dead Aid’, Collier’s ‘Bottom Billion’ and Eubank’s ‘Somaliland’. The empirical evidence is based on updated data from 52 African countries for the period 1996-2010. Design/methodology/approach – An endogeneity robust instrumental variable Two-Stage-Least Squares empirical strategy is employed. Findings – The findings reveal that development assistance deteriorates economic (regulation quality and government effectiveness) and institutional (corruption-control and rule of law) governance, but has an insignificant effect on political (political stability, voice and accountability) governance. While, these findings are broadly in accordance with Moyo (2009) and Collier (2007) on weak governance, they neither confirm the Eubank (2012) position on political governance nor the Asongu (2012) stance on the aid-corruption nexus in his debate with Okada & Samreth (2012). Practical implications – The use of foreign aid as an instrument to influence the election and replacement of political leaders in Africa may have insignificant results. It is time to solve the second tragedy of foreign aid and that economists and policy makers start rethinking the models and theories on which foreign aid is used to influence economic, institutional and political governance in recipient countries. Originality/value – The paper extends the debate on foreign aid and institutions in Africa in the light a plethora of recent studies in the aid literature

Foreign Aid and Inclusive Development: Updated Evidence from Africa, 2005-2012

Motivated by the April 2015 World Bank Publication on MDGs which reveals that poverty has been declining in all regions of the world with the exception of African countries, this study investigates the effects of a plethora of foreign aid dynamics on inequality adjusted human development. Contemporary and non-contemporary OLS, Fixed-effects and a system GMM technique with forward orthogonal deviations are employed. The empirical evidence is based on an updated sample of 53 African countries for the period 2005-2012.The following findings are established. First, the impacts of aid dynamics with high degrees of substitution are positive. These include aid for: social infrastructure, economic infrastructure, the productive sector and multi-sectors. Second, the effect of humanitarian assistance is consistently negative across specifications and models. Third, the effects of programme assistance and action on debt are ambiguous because they become positive with the GMM technique. Justifications for these changes and clarifications with respect to existing literature are provided. Policy implications are discussed in the light of the post-2015 development agenda. We also provide some recommendations for a rethinking of theories and models on which development assistance is based

The Role of Lifelong Learning in Political Stability and Non-violence: Evidence from Africa

Purpose – Education as a weapon in the fight against conflict and violence remains widely debated in policy and academic circles. Against the background of growing political instability in Africa and the central role of the knowledge economy in 21st century development, this paper provides three contributions to existing literature. It assesses how political stability/ non-violence is linked to the incremental, synergy and lifelong learning effects of education. Design/methodology/approach – We define lifelong learning as the combined knowledge acquired during primary, secondary and tertiary education. Principal component analysis is used to reduce the dimensions of educational and political indicators. An endogeneity robust dynamic system Generalized Methods of Moments is used for the estimations. Findings – We establish three main findings. First, education is a useful weapon in the fight against political instability. Second, there is an incremental effect of education in the transition from secondary to tertiary schools. Third, lifelong learning also has positive and synergy effects. This means that the impact of lifelong learning is higher than the combined independent effects of various educational levels. The empirical evidence is based on 53 African countries for the period 1996-2010. Practical implications – A plethora of policy implications are discussed, inter alia: how the drive towards increasing the knowledge economy through lifelong learning can be an effective tool in the fight against violence and political insurgency in Africa. Originality/value – As the continent is nursing knowledge economy ambitions, the paper is original in investigating the determinants of political stability/non violence from three dimensions of education attainment: the incremental, the lifelong learning and a synergy effect

Finance and Inclusive Human Development: Evidence from Africa

This study investigates direct and indirect linkages between financial development and inclusive human development in data panels for African countries using a battery of estimation techniques, notably: Two-Stage Least Squares, Fixed Effects, Generalized Method of Moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database (FDSD) of the World Bank are considered. The main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development. Policy implications are discussed in the light of fighting surplus liquidity and providing information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers

The Role of Lifelong Learning in Political Stability and Non-violence: Evidence from Africa

Purpose – Education as a weapon in the fight against conflict and violence remains widely debated in policy and academic circles. Against the background of growing political instability in Africa and the central role of the knowledge economy in 21st century development, this paper provides three contributions to existing literature. It assesses how political stability/ non-violence is linked to the incremental, synergy and lifelong learning effects of education. Design/methodology/approach – We define lifelong learning as the combined knowledge acquired during primary, secondary and tertiary education. Principal component analysis is used to reduce the dimensions of educational and political indicators. An endogeneity robust dynamic system Generalized Methods of Moments is used for the estimations. Findings – We establish three main findings. First, education is a useful weapon in the fight against political instability. Second, there is an incremental effect of education in the transition from secondary to tertiary schools. Third, lifelong learning also has positive and synergy effects. This means that the impact of lifelong learning is higher than the combined independent effects of various educational levels. The empirical evidence is based on 53 African countries for the period 1996-2010. Practical implications – A plethora of policy implications are discussed, inter alia: how the drive towards increasing the knowledge economy through lifelong learning can be an effective tool in the fight against violence and political insurgency in Africa. Originality/value – As the continent is nursing knowledge economy ambitions, the paper is original in investigating the determinants of political stability/non violence from three dimensions of education attainment: the incremental, the lifelong learning and a synergy effect

Political Regimes and Stock Market Performance in Africa

This paper assesses the effect of political institutions on stock market performance in 14 African countries for which stock market data is available for the period 1990-2010. The estimation technique used is a Two-Stage-Least Squares Instrumental Variable methodology. Political regime channels of democracy, polity and autocracy are instrumented with legal-origins, religious-legacies, income-levels and press-freedom qualities to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The findings show that countries with democratic regimes enjoy higher levels of financial market development compared to their counterparts with autocratic inclinations. As a policy implication, the role of sound political institutions has important effects on both the degree of competition for public office and the quality of public offices that favour stock market development on the African continent

Foreign Aid and Governance in Africa

Purpose – This paper investigates the effect of foreign aid on governance in order to extend the debates on foreign aid and to verify common positions from Moyo’s ‘Dead Aid’, Collier’s ‘Bottom Billion’ and Eubank’s ‘Somaliland’. The empirical evidence is based on updated data from 52 African countries for the period 1996-2010. Design/methodology/approach – An endogeneity robust instrumental variable Two-Stage-Least Squares empirical strategy is employed. Findings – The findings reveal that development assistance deteriorates economic (regulation quality and government effectiveness) and institutional (corruption-control and rule of law) governance, but has an insignificant effect on political (political stability, voice and accountability) governance. While, these findings are broadly in accordance with Moyo (2009) and Collier (2007) on weak governance, they neither confirm the Eubank (2012) position on political governance nor the Asongu (2012) stance on the aid-corruption nexus in his debate with Okada & Samreth (2012). Practical implications – The use of foreign aid as an instrument to influence the election and replacement of political leaders in Africa may have insignificant results. It is time to solve the second tragedy of foreign aid and that economists and policy makers start rethinking the models and theories on which foreign aid is used to influence economic, institutional and political governance in recipient countries. Originality/value – The paper extends the debate on foreign aid and institutions in Africa in the light a plethora of recent studies in the aid literature

Political Regimes and Stock Market Performance in Africa

This paper assesses the effect of political institutions on stock market performance in 14 African countries for which stock market data is available for the period 1990-2010. The estimation technique used is a Two-Stage-Least Squares Instrumental Variable methodology. Political regime channels of democracy, polity and autocracy are instrumented with legal-origins, religious-legacies, income-levels and press-freedom qualities to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The findings show that countries with democratic regimes enjoy higher levels of financial market development compared to their counterparts with autocratic inclinations. As a policy implication, the role of sound political institutions has important effects on both the degree of competition for public office and the quality of public offices that favour stock market development on the African continent

Foreign aid instability and bundled governance dynamics in Africa

Purpose- With the recent financial crisis and reduction of foreign aid by donor countries, the aid-institutions debate is shifting to how aid instability affects governance in developing countries. We engage the policy debate by assessing the role of foreign aid instability on governance dynamics in fifty three African countries for the period 1996-2010. Design/methodology/approach- An autoregressive endogeneity-robust Generalized Methods of Moments is employed. Instabilities are measured in terms of standard errors and standard deviations. Three main aid indicators are used, namely: total aid, aid from multilateral donors and bilateral aid. Principal Component Analysis is used to bundle governance indicators, namely: political governance (voice & accountability and political stability/non violence), economic governance (regulation quality and government effectiveness), institutional governance (rule of law and corruption-control) and general governance (political, economic and institutional governance). Findings- Our findings show that foreign aid instability increases governance standards, especially political and general governance. Practical implications- In the presence of foreign aid instability, governments could be constrained to improve governance standards in exchange for, or anticipation of greater dependence on local tax revenues. Moreover, bundling governance indicators improves insights into how macroeconomic variables affect governance. This is essentially because, while aid instability improves general governance, for the most part it is not consistently for economic and institutional governance. Originality/value- The paper has contributed to the aid-institutions’ literature by examining how aid instabilities affect an aggregate index of governance dynamics in Africa