The Devil is in the Details: On the Robust Determinants of Development Aid in G5 Sahel Countries

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Bayale, Nimonka
Kouassi, Brigitte Kanga
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African Economic Research Consortium
This paper introduces model uncertainty into the empirical study on the determinants of development aid at the regional level. This is done by adopting a panel Bayesian model averaging approach applied to the data of G5 Sahel countries, spanning the period 1980–2018. Our results suggest that, among the regressors considered, those reflecting terrorist attacks, trade stakes including military expenditure, socio-economic prospects and institutional conditions tend to receive high posterior inclusion probabilities. The study explores the relationship between these regressors and foreign aid by employing the fully modified ordinary least squares (FMOLS), the continuously updated fully modified (CUP-FM), the dynamic ordinary least squares (DOLS) long-run estimators, and the Dumitrescu and Hurlin (2012) panel causality test. The results highlight three concerns that may justify aid flows towards G5 Sahel countries: (a) peace and security considerations, (b) the economic interest of donors, and (c) recipient economic needs. The paper recommends that Sahel countries should strengthen international cooperation for security and peace, in compliance with goal 16 of the 2030 Agenda for Sustainable Development of the United Nations (UN) and goal 13 of the African Union’s (AU) Agenda 2063.