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Aid and Per-Capita Economic Growth in Asia: A Panel Cointegration Test

Author

Listed:
  • Rajarshi Mitra

    (Higher School of Economics)

  • Md. Sharif Hossain

    (University of Dhaka)

  • Md. Iqbal Hossain

    (Janata Bank Ltd.)

Abstract

In light of growing skepticism toward aid-effectiveness for economic growth in aid-dependent economies, this paper investigates the aid-growth nexus for a panel of 13 Asian economies that have historically been some of the largest recipients of foreign aid, namely, Afghanistan, Bangladesh, Bhutan, Cambodia, India, Lao PDR, Maldives, Myanmar, Nepal, Pakistan, Philippines, Sri Lanka and Vietnam. The period of study is 1971-2010. Both short-run and long-run effects of foreign aid on economic growth are significantly negative: a 1% rise in aid (in share of GDP) results in 0.18% fall in per-capita real income in the long-run; thus, if the aid-dependent Asian countries continue to receive foreign aid, then over time, per-capita economic growth in those countries will decline. Cointegrating relationships also indicate significantly positive long-run effects of trade openness and domestic investment on per-capita economic growth.

Suggested Citation

  • Rajarshi Mitra & Md. Sharif Hossain & Md. Iqbal Hossain, 2015. "Aid and Per-Capita Economic Growth in Asia: A Panel Cointegration Test," Economics Bulletin, AccessEcon, vol. 35(3), pages 1693-1699.
    • Handle: RePEc:ebl:ecbull:eb-15-00376
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    References listed on IDEAS

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    Cited by:

    1. Arsalan, Rahmatullah, 2019. "Foreign Aid and Economic Development A study of Foreign Aid and Its Effects and Relationship with Per Capita Income of Afghanistan," MPRA Paper 96136, University Library of Munich, Germany, revised Sep 2019.
    2. Md Ismail Hossain & Md Istiak Hossain & Mollah Aminul Islam & Md Reza Sultanuzzaman, 2022. "Does Foreign Aid Have an Expected Role in the Economic Growth of Bangladesh? An Analysis in ARDL Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 113-126, November.

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    More about this item

    Keywords

    Unit Root Tests; Panel Cointegration Tests; Short-Run Effects; Long-Run Effects.;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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