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Comparative Analysis of the Effect ‎of Remittances and Foreign Aid ‎Inflows on Economic ‎Growth in ‎ECOWAS Sub Region

Dr. John Norense Izevbigie, Dr. Clement A. Ighodaro and Mr. Esosa J. Sowemimo

Volume 3 Issue 1 | Mar 2020

DOI: 10.31841/KJEMS.2021.39

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The comparative effect of remittances and foreign aid inflows on economic ‎growth in ECOWAS ‎sub-region was examined for the period spanning 2005 ‎and 2017. GMM estimation technique ‎employed shows that the effect of ‎remittances on economic growth outweighs foreign aid inflow in ‎ECOWAS ‎sub region for the period. This was evidenced in the magnitude of ‎coefficient and the ‎predictability of each of the variables. The periodic ‎analysis shows that remittances and foreign ‎aid inflow positively affects ‎economic growth with the exception of years 2005 and 2006. Also, the ‎‎probability value of j-statistics shows that the moment restriction is valid ‎and that the model is well ‎specified. However, wald test, variance ‎decomposition test, movement graph and principal ‎component analysis ‎test revealed that foreign aid exerts more influence on economic growth ‎‎compared to remittances inflows in ECOWAS sub region for the period. ‎Recommendations such ‎as ensuring that remittances and foreign aid ‎inflows are continually channel into productive uses ‎through policy and ‎policy coordination in ECOWAS sub region were put forward. ‎

Keywords: ECOWAS, Remittances, Foreign Aid, Economic Growth