Does Foreign Aid Promote Economic Growth in Sudan? Evidence from ARDL Bounds Testing Analysis

This study examines the relationship between foreign aid and economic growth in Sudan using autoregressive distrusted lag (ARDL) bounds tests. Relying on time series data spanned over the period 1980 to 2015, the findings reveal that there is a long run relationship between variables under consideration. Specifically, the findings show that foreign aid in the form of official development assistance (ODA) has a positive and significant long run impact on economic growth in Sudan. However, the interaction between aid and corruption in public institutions imposes a negative and significant long run impact on economic growth. Interestingly, the findings indicate that aid deters economic growth in the short run. This outcome may stand as indication that aid spurs economic growth via its contributions to human capital and improving infrastructural facilities both of which become rewarding in the long run. The paper concludes with the importance of utilizing aid in enhancing human capital capacities in order to boost economic growth.