Foreign Aid Effectiveness in Ghana

Ghana has been the recipient of large levels of aid since the 1980s. This coincides with significant improvements in the country including increased growth and poverty reduction. We analyze the role of foreign aid in Ghana’s success. Using annual data from 1961 to 2012, we employ an error correction model to estimate the long-run relationship between aid and conditional aid in Ghana’s economic growth. We find that conditional aid has a positive and statistically significant impact on growth. Through an examination of Ghana over three phases with varying aid and conditionality, we conclude that Ghana’s success with conditional aid is related to the country’s ownership of reforms.