Impact of Official Development Assistance on Socio-Economic Development in Liberia

Abstract

This study investigates the impact of Official Development Assistance (ODA) on Liberia’s socio-economic development indicators over the period 1991–2022, employing a Vector Autoregression (VAR) model. By analyzing the dynamic interrelationships among key variables such as ODA inflows, gross domestic product per capita, and unemployment rates, the research explores short-term fluctuations as no cointegration of variables was found. The analysis incorporates unit root tests to determine the stationarity of the series and uses the VAR framework to capture the bidirectional influences among variables. Granger causality tests are applied to examine the directions of influence. The research findings indicate that although Liberia receives considerable aid, there is little clear evidence of a meaningful improvement in important socio-economic measures such as GDP per capita and unemployment rates. The research highlights the importance of improving aid utilization, governance, and domestic capacity to translate aid into sustainable socio-economic progress. Policy recommendations emphasize strengthening aid coordination, institutional capacity, and strategies for effective aid absorption to foster inclusive and resilient development.

Keywords: VAR, ODA, development, Liberia.

DOI: 10.7176/JESD/16-3-02

Publication date: May 30th 2025