Foreign aid— real exchange rate Nexus: Empirical evidence from Ghana

Figures & data

Table 1. Net ODA Ghana received from 1990 to 2015

Year	Net ODA received (current US$)	Net ODA received (% of central government expense)	Net ODA received (% of GNI)	Net ODA received (% of gross capital formation)	Net ODA received (% of imports of goods, services and primary income)
1990	559,720,000	–	9.7	65.8	35.4
2000	600,650,000	–	12.4	50.2	17.3
2007	1,162,920,000	26.3	4.7	23.4	11.1
2008	1,312,170,000	22.4	4.6	21.4	10.3
2009	1,584,690,000	33.8	6.1	29.5	13.5
2010	1,697,220,000	26.2	5.4	20.3	11.7
2011	1,803,860,000	21.6	4.7	17.2	8.7
2012	1,799,290,000	–	4.5	13.5	7.4
2013	1,328,610,000	–	2.9	10.0	5.5
2014	1,123,720,000	–	3.0	10.7	5.3
2015	1,768,290,000	–	4.9	19.1	7.9

Source: Authors own construct (2017), data extracted from World Development Indicators

Figure 1. Trend and Pattern of Exchange rate and Foreign Aid.

Source: Author’s own construction (2017)

Table 2. Stationarity and Unit Root

	DF-GLS				ADF
	AT LEVEL		FIRST DIFF.		AT LEVEL		FIRST DIFF.
Variable	Constant	C,Trend	Constant	C,Trend	Constant	C,Trend	Constant	C,Trend
LNAID	−0.916	−2.335	−6.061***	−6.268***	−1.360	−2.202	−6.190***	−6.154***
LNGOV	−2.777***	−3.603**			−2.764*	−3.534*	−6.602***	−6.495***
LNGDP	−4.107***	−5.497***			−4.073***	−9.204***
LNM2	−2.037**	−0.222	−2.108**	−6.497***	−2.373	−0.215	3.639***	−6.371***
LNTOT	−3.944***	−4.418***			−4.288***	4.343***
RER	−0.933	−1.446	−4.579***	−4.896***	−1.863	−1.407	−4.771***	−4.968***

***,** and * denotes 1%, 5% and 10%, respectively

Source: Author’s own computation (2017)

Table 3. Lag order selection

Number of lags	Akaike Information Criterion	Schwarz Bayesian Information Criterion	Hannan-Quinn Information Criterion
1	7.13*	7.27*	7.16*
2	7.15	7.29	7.20
3	7.21	7.40	7.28
4	7.25	7.47	7.32

Source: Author’s own computation (2017)

Table 4. Bounds Co-integration Test

	Critical Value
Significance level	Lower bound	Upper bound	F calculated Statistic
1%	4.400	5.664
5%	3.152	4.156	10.981
10%	2.622	3.506

Note: “Critical values for bounds test are from Pesaran (2008), Case D: restricted intercept and no trend”

Source: Author’s own computation (2017)

Table 5. The ARDL Model

Regressor	Coefficient	Standard Error	T-Ratio[Prob]
Panel (A)
lnRER	0.857	0.069	12.439[0.000]
lnGDP	0.024	0.013	1.817[0.081]
lnGDP(−1)	−0.024	0.014	−1.788[0.085]
lnTOT	0.845	0.373	2.268[0.032]
lnTOT(−1)	−0.798	0.330	−2.418[0.023]
lnAID	−0.054	0.031	−1.735[0.095]
lnGOV	−0.031	0.035	−0.894[0.380]
lnGOV(−1)	−0.056	0.032	−1.754[0.091]
lnM2	0.144	0.231	0.624[0.538]
lnM2(−1)	−0.577	0.256	−2.253[0.033]
Panel (B) Diagnostic Test
R-squared			0.95
DW statistic			1.47
Serial correlation			1.021[0.322]
Functional form			1.618[0.215]
Normality			3.018[0.221]
Heteroscedasticity			3.607[0.073]

Note: In panels (A and B), figures in square bracket are the p-values

Source: Author’s own computation (2017)

Figure 2. CUSUM Test.

Figure 3. CUSUMSQ Test.

Table 6. Long-Run Estimates of the Real Exchange Rate

Estimated Long Run Coefficients using the ARDL Approach. ARDL(1,1,1,0,1,1) selected based on Akaike Information Criterion
Variable	Coefficient	Standard Error	T-Ratio[Prob]
Dependent variable is lnRER
lnGDP	−0.002	0.129	−0.016[0.988]
lnTOT	0.329	3.109	0.106[0.917]
lnAID	−0.376	0.158	−2.379[0.025]
lnGOV	−0.611	0.388	−1.573[0.128]
lnM2	−3.032	1.014	−2.991[0.006]

Note: Figures in square bracket are the p-values

Source: Author’s own computation (2017)

Table 7. Short-Run (Error-Correction Model) Estimates of the Real Exchange Rate

Error Correction Representation for the Selected ARDL Model ARDL(1,1,1,0,1,1) selected based on Akaike Information Criterion
Variable	Coefficient	Standard Error	T-Ratio[Prob]
D(lnGDP(−1))	0.024	0.013	1.817[0.079]
D(lnTOT(−1))	0.845	0.373	2.268[0.031]
D(lnAID(−1))	−0.054	0.031	−1.735[0.093]
D(lnGOV(−1))	−0.031	0.035	−0.894[0.379]
D(lnM2(−1))	0.144	0.231	0.624[0.537]
Ecm(−1)	−0.14	0.069	−2.074[0.047]
Diagnostic Test
R-squared			0.56
DW statistic			1.47

Note: Figures in square bracket are p-values

Source: Author’s own computation (2017)

World Bank. (2017). World development Indicators. Washington, DC: Author.

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