Assessing the Impact of Foreign Aid and Financial Flows on Food Security: Evidence from African Economies

Abstract

The paper provides empirical evidence regarding the impact of foreign aid, remittances, and foreign direct investment (FDI) on food security of African countries. Using data from 37 African countries over two decades (2001–2020), and employing an estimation strategy that accounts for both endogeneity and unobserved heterogeneity, we examine the relationship between financial flows and food security – proxied by average energy supply adequacy and per capita food supply variability. Our findings indicate that the effect of foreign aid on food security depends on how broadly/narrowly we measure foreign aid. While the broad measure, official development assistance, does not seem to have a significant impact on food security, narrowly defined aid affects food security in a significant way. The other two financial flow variables (FDI and remittances) show mixed impact on food security over the period of the study. Our results are robust to various model specifications and estimation strategy.