The Long Run Effects of Foreign Aid on Economic Growth by Sector of Distribution

Although the amount of foreign aid received by Bangladesh as a share of GDP has declined over the years, Bangladesh remains one of the heavily aiddependent countries in Asia. The results of most empirical studies that have examined the effectiveness of foreign aid or other forms of development assistance for economic growth have varied considerably depending on the econometric methodology used and the period of study. As the debate and controversy over aid-effectiveness for economic growth continue to grow, this paper reinvestigates the short-run and long-run effects of foreign aid received on percapita real income of Bangladesh over the period 1972–2015. A vector error correction model is estimated. The results indicate lack of any significant short-run and long-run relation between foreign aid and per-capita real income. Results further indicate short-run unidirectional causalities from per-capita real GDP to domestic investment (in proportion to GDP), from government expenditure (in proportion to GDP) to inflation rate, from inflation rate to domestic investment (in proportion to GDP), and from domestic investment to foreign aid (as percentages of GDP). Short-run bidirectional causality is observed between per-capita electricity consumption and per-capita real GDP, and between per-capita real GDP and government expenditure (in proportion to GDP).

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Modelling the Nexus Between Foreign Aid and Economic Growth: A Case of Afghanistan and Egypt

Studies of Applied Economics ◽

10.25115/eea.v39i2.3802 ◽

2021 ◽

Vol 39 (2) ◽

Author(s):

Muhammed Ashiq Villanthenkodath ◽

Ubaid Mushtaq

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Time Series Data ◽

Trade Openness ◽

Political Stability ◽

Series Data ◽

Long Run ◽

Short Run ◽

Annual Time Series ◽

And Control

This paper tries to explore the existence of a long-run relationship between foreign aid and economic growth by using the data from the two highest foreign aid recipient countries. Using the annual time series data from 1965 to 2017 this study uses several econometric models such as Johansen and Juselius cointegration, Granger causality and vector auto regression to establish the long and short-run relationships among foreign aid inflows and economic growth while also considering financial development and trade openness from both the countries. The empirical results suggest that no long-run relationship exists among foreign aid inflows and economic growth for both the countries. However, unidirectional causality running from foreign aid to economic growth is indicative in both countries. Therefore, the findings in this paper support the adequate need for foreign aid for effective economic growth amid an upright policy environment, related issues of conditionality and political stability. Our results are robust to independent, and control variables and estimation techniques are also on par with robustness.

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Sources of Economic Growth in Zambia: An Empirical Investigation

Global Business Review ◽

10.1177/0972150916668449 ◽

2017 ◽

Vol 18 (2) ◽

pp. 275-290 ◽

Cited By ~ 11

Author(s):

Themba G. Chirwa ◽

Nicholas M. Odhiambo

Keyword(s):

Economic Growth ◽

Human Capital ◽

International Trade ◽

Foreign Aid ◽

Development Aid ◽

Human Capital Development ◽

Long Run ◽

Short Run ◽

Capital Development ◽

Macroeconomic Determinants

In this article, the key macroeconomic determinants of economic growth in Zambia are investigated using the autoregressive distributed lag (ARDL) bounds testing approach. The study has been motivated by the unsustainable growth trends that Zambia has been experiencing in recent years. Our study finds that the key macroeconomic determinants that are significantly associated with economic growth in Zambia include, amongst others, investment, human capital development, government consumption, international trade and foreign aid. The study’s results reveal that in the short run, investment and human capital development are positively associated with economic growth, while government consumption, international trade and foreign aid are negatively associated with economic growth. However, in the long run, the study finds investment and human capital development to be positively associated with economic growth, while only foreign aid is negatively associated with economic growth. These results have significant policy implications. They imply that short–run economic policies should focus on creating incentives that attract investment and increase the quality of education, the effectiveness of government institutions, the promotion of international trade reforms and the effectiveness of development aid. In the long run, development strategies should focus on attracting the accumulation of long-term investment, improving the quality of education and the effectiveness of development aid.

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Foreign Aid and Economics Development Nexus: The Case of Sierra Leone

Archives of Business Research ◽

10.14738/abr.96.10395 ◽

2021 ◽

Vol 9 (6) ◽

pp. 219-233

Author(s):

Ezekiel Kalvin Duramany-Lakkoh

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Sierra Leone ◽

Growth And Development ◽

Secondary Data ◽

Empirical Estimation ◽

Economic Growth And Development ◽

Long Run ◽

Short Run ◽

The Impact

This study investigates the impact of foreign aid on economic growth in Sierra Leone using cointegration and error correction methodology by Johansen and Juselius (1990). Utilizing secondary data for the period 1970 to 2018, the empirical estimation revealed that foreign aid in Sierra Lone is positively and significantly related to economic growth both in the short run and long run, confirming the importance of the study. The policy implication of the study is that the Sierra Leone government should seek more foreign aid to accelerate economic growth and development.

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Effects of Foreign Debt and Foreign Aid on Economic Growth in Somalia

International Journal of Economics and Finance ◽

10.5539/ijef.v10n11p95 ◽

2018 ◽

Vol 10 (11) ◽

pp. 95

Author(s):

Ali Yassin Sheikh Ali ◽

Mohamed Saney Dalmar ◽

Ali Abdulkadir Ali

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Unit Root ◽

Foreign Debt ◽

Ordinary Least Squares ◽

Policy Implications ◽

Cointegration Test ◽

Long Run ◽

Johansen Cointegration ◽

Johansen Cointegration Test

This paper aims to assess the effects of foreign debt and foreign aid on economic growth in Somalia from 1970 to 2014. The ordinary least squares (OLS) method was used and basic model assumption tests were also employed. We used the Augmented Dickey−Fuller (ADF) and Philip-Perron (PP) tests for the unit root and the Johansen cointegration test to determine the long-run relationship between the variables. The results of the study show that, in Somalia, foreign debt has an insignificant effect on economic growth, while the foreign aid has positive significant effect on economic growth. The results also indicate that the cointegration method confirms the incidence of long-run association among the variables. There is little research regarding the exact relationship between increasing foreign debt and foreign aid on economic growth in Somalia. This study is also different from previous studies as we used ADF and PP tests for the unit root and the Johansen cointegration test for the long-run relationship between the variables. Additionally, the study used multivariate techniques. The paper concludes that foreign aid is essential in economic growth and several policy implications are proposed.

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Foreign aid, workers’ remittances and economic growth in Jordan

International Journal of Social Economics ◽

10.1108/ijse-06-2018-0293 ◽

2019 ◽

Vol 46 (4) ◽

pp. 532-548 ◽

Cited By ~ 1

Author(s):

Jamal G. Husein

Keyword(s):

Economic Growth ◽

Time Series ◽

Economic Policy ◽

Human Capital ◽

Foreign Aid ◽

Empirical Evidence ◽

World Bank ◽

Macroeconomic Policy ◽

Content Type ◽

Long Run

Purpose The purpose of this paper is to investigate the long-run impact of foreign aid and workers’ remittances on Jordanian economic growth using time series data for the period 1970–2014. Following the most recent literature, the author also assess whether economic policy enhances economic growth and whether aid effectiveness is conditional on levels of economic policy. Design/methodology/approach The author employs unit root tests that allow for endogenously determined structural breaks (Perron, 1997) and properly utilize the autoregressive distributed lag (ARDL) or bounds testing approach to cointegration by applying both the F- and the t-test statistics (Pesaran et al., 2001). The analysis is applied to 12 different models that incorporates the various types and sources of foreign aid. Findings Empirical results suggest that aid and its various components, and workers’ remittances have had a positive and significant long-run impact on economic growth. Empirical results also show: no evidence supporting the hypothesis that aid is only or more effective in spurring economic growth during periods of “good” macroeconomic policy, i.e., when Jordan has undertaken World Bank Structural Adjustment Programs (SAPs); no robust evidence supporting the World Bank’s claim that SAPs are growth enhancing. Moreover, the author found strong empirical evidence suggesting that exports and human capital are also major determinants of long-run growth in Jordan. Research limitations/implications Although Jordan and the region at large have experienced periods of major political instability that may have had a varying impact on the economy, lack of a reliable and lengthy time series measure that accounts for political instability is not available to include in the study. Practical implications Using cointegration analysis, our empirical evidence reveals that foreign aid, labor remittances, exports and human capital have had a robust positive long-run impact on economic growth. Hence, the Jordanian government should promote policies that encourage donor countries and agencies to further extend aid to Jordan. Moreover, policies that promote exports and facilitate labor mobility to neighboring countries should also be encouraged and promoted. Originality/value Despite receiving a significant amount of foreign aid and labor remittances in the last 50 years, the author found no time series study that tested the long-run impact of these external financing sources on growth in Jordan. This study fills that gap and extends the analysis to test whether macroeconomic policy is growth enhancing and whether aid (and several of its components) are only effective or more effective in promoting growth during periods of “good” macroeconomic policy, i.e., when Jordan has undertaken a World Bank SAP.

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Do foreign aid triggers economic growth in Chad? A time series analysis

Future Business Journal ◽

10.1186/s43093-021-00063-y ◽

2021 ◽

Vol 7 (1) ◽

Author(s):

Dervis Kirikkaleli ◽

Ibrahim Adeshola ◽

Tomiwa Sunday Adebayo ◽

Abraham Ayobamiji Awosusi

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Global Financial Crisis ◽

Capital Formation ◽

Wavelet Coherence ◽

High Tech ◽

Gdp Growth ◽

Annual Data ◽

Domestic Investment ◽

Long Run

AbstractThis study explores the nexus between foreign aid and Chad's economic growth. Empirical evidence is based on annual data from 1982 to 2018. The study used ARDL, FMOLS, and DOLS techniques to establish interconnection among the economic indicators. Subsequently, the study utilized the wavelet coherence technique to capture causality and correlation between economic growth and the independent variables. One of the wavelet approach's uniqueness is that it shows the pattern and behavior of the variables used, including the different time horizons. Thus, we explore the dynamic influence of gross capital formation, foreign aid, import, and export on Chad's economic growth. The result of the ARDL long-run estimates reveals that gross capital formation and foreign aid exert insignificant impact on GDP growth. However, exports and imports exert a positive and significant impact on GDP growth. Furthermore, the global financial crisis has a negative and significant impact on the economy of Chad. The outcomes of the wavelet coherence test provide supportive evidence for the ARDL long-run outcomes. Hence, we suggested that substantial macroeconomic reforms and economic liberalization initiatives will help in the dissemination of information and promote domestic investment and importation of high-tech goods.

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Determinants of Economic Growth: An Empirical Evaluation of the Ugandan Economy

10.5772/intechopen.100507 ◽

2021 ◽

Author(s):

Richard Sendi ◽

John Bbale Mayanja ◽

Enock Nyorekwa

Keyword(s):

Economic Growth ◽

Human Capital ◽

Population Growth ◽

Foreign Aid ◽

Trade Openness ◽

Gdp Growth ◽

Government Consumption ◽

Long Run ◽

Short Run ◽

Determinants Of Economic Growth

This paper investigated the determinants of economic growth in Uganda for the period 1982–2015 using the autoregressive distributed lag (ARDL) mode. The paper was motivated by the impressive economic performance of Uganda since 1986 that made her graduate from a “failed state” to a “mature reformer” in a short time. The paper established that while the initial level of GDP growth, government consumption and investment positively affected Uganda’s economic growth in the short run, inflation, foreign aid and a policy dummy variable representing structural adjustment programmes negatively impacted GDP growth. The results revealed that in the long run, trade openness, population growth, government consumption and investment positively influenced GDP growth in Uganda. The results failed to show a significant relationship between trade openness, population growth and human capital accumulation and economic growth in the short run. The study also failed to show a significant relationship between inflation, human capital and foreign aid and economic growth in the long run. The paper recommends policies that enhances sound macroeconomic fundamentals such as price stability, investment promotion, trade openness, increased government consumption, increased population growth and effective foreign aid.

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Empirical Analysis of the Macroeconomic impact of Foreign Aid on Pakistan Economy (1972-2014)

Journal of Accounting and Finance in Emerging Economies ◽

10.26710/jafee.v7i3.1855 ◽

2021 ◽

Vol 7 (3) ◽

pp. 587-596

Author(s):

Hifsa Bibi ◽

Amjad Amin ◽

Danish Alam

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Empirical Analysis ◽

Research Work ◽

Secondary Data ◽

Foreign Assistance ◽

Long Run ◽

Depth Analysis ◽

Macroeconomic Impact ◽

Short Run

Purpose: Although Pakistan receives large quantity of foreign aid, like other developing countries, but it remains more dependent on foreign assistance for economic development since independence. This situation has commenced a vigorous discussion on aid-growth effectiveness. Methodology: This research work evaluates the macroeconomic impact of foreign aid on Pakistan economy by using secondary data. The empirical analysis is based on ARDL cointegration approach after testing for unit root, using the data for the period 1972-2014. Findings: The findings suggest there is no long run relationship between Foreign aid and Economic Growth. However, there exists negative short run relation between Foreign aid and Economic Growth of Pakistan. Implications: Based on the study findings, the study recommends that government of Pakistan should find alternate sources of financing as the relation between foreign aid and economic growth is found negative and insignificant. The in depth analysis of the study made it evident that allocation of aid to those sectors of the economy which really needs development, is more productive, provided that the country should use aid funds in the right direction, as corruption less economy prosper more rapidly.

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Impact of Tourism on Economic Growth of Nepal: Is Tourism-Led Growth Hypothesis Valid for Nepal?

The Gaze Journal of Tourism and Hospitality ◽

10.3126/gaze.v13i1.42081 ◽

2022 ◽

Vol 13 (1) ◽

pp. 93-110

Author(s):

Kumar Bhattarai ◽

Roshan Karmacharya

Keyword(s):

Economic Growth ◽

Foreign Aid ◽

Series Data ◽

Outcome Variable ◽

Consumption Expenditure ◽

Government Consumption ◽

Long Run ◽

Short Run ◽

Growth Hypothesis ◽

Volume Of Trade

A voluminous study is available on tourism-growth nexus as tourism industry received considerable attention as a potential source of economic growth. This paper empirically examines the impact of tourism on economic growth of Nepal by using time series data of 1976-2020 and applying autoregressive distributed lag (ARDL) approach. Real GDP was used as proxy measure of economic growth, which was the outcome variable whereas the variable of interest was tourism receipts. Foreign aid, total volume of trade and ratio of government consumption expenditure to GDP were taken as control variables. The result of ARDL model shows that tourism has no significant impact on economic growth of Nepal in both short-run and long-run. However, total volume of trade has positive and significant effect on economic growth in short-run whereas foreign aid, total volume of trade and ratio of government consumption expenditure to GDP have positive and significant effect on economic growth in the long-run. In such context of tourism and growth relationship, tourism-led growth hypothesis is rejected for Nepal.

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