Official development assistance and economic growth in fragile states: Evidence from the Democratic Republic of Congo
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Official development assistance and economic growth in fragile states: Evidence from the Democratic Republic of Congo
Publisher: African Review of Economics and Finance
Pub: 2026-09-29 09:32:43
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This paper investigates the relationship between official development assistance (ODA) and economic growth (GDP) in the Democratic Republic of Congo (DRC) using a Vector Error Correction Model (VECM) over 2000Q1-2021Q4. Given data constraints, annual macroeconomic series are temporally disaggregated to quarterly frequency to examine short-run dynamics and long-run relationships. The results identify a stable long-run relationship among ODA, GDP, investment, and inflation. The errorcorrection estimates show that ODA and inflation significantly adjust to disequilibrium, with ODA correcting approximately 7% of deviations per quarter. Granger-causality tests provide no evidence that ODA predicts GDP or investment in the short-run. Consistently, impulse-responses show no statistically significant GDP or price response to positive ODA shocks, while investment exhibits only a temporary negative response. Variance decomposition indicates that ODA makes a modest contribution to GDP fluctuations, reaching 5.8% after twelve quarters, while investment shocks become increasingly important, accounting for 37.6%. Overall, ODA participates in long-run macroeconomic adjustment but exhibits limited identifiable effects on short-to medium-term economic growth in the DRC.
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Keywords
Official development assistance; Economic growth; Gross domestic product; Vector error correction model (VECM); Democratic Republic of Congo.
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Keywords
Official development assistance; Economic growth; Gross domestic product; Vector error correction model (VECM); Democratic Republic of Congo.