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Foreign aid and growth in Nepal: an empirical analysis

Author

Listed:
  • Badri Prasad Bhattarai

    (University of Western Sydney, Australia)

Abstract

Using cointegration and error correction mechanism, this paper investigates the effectiveness of aid in Nepal during the period 1983-2002. Specifically, it examines the long-run relationship between aid and per capita real GDP. To address the current debate on whether aid works only in a good policy environment, we have included policy variables for macroeconomic stability, financial sector development and openness in an extended model. The results show that foreign aid has a positive and statistically significant effect on per capita real GDP in the long-run. More importantly, aid effectiveness improves in the presence of good policy environment.

Suggested Citation

  • Badri Prasad Bhattarai, 2009. "Foreign aid and growth in Nepal: an empirical analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 42(2), pages 283-302, January-M.
    • Handle: RePEc:jda:journl:vol.42:year:2009:issue2:pp:283-302
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    Citations

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    Cited by:

    1. Keshab Raj Bhattarai, 2016. "Economic Growth and Development in India and SAARC Countries," EcoMod2016 9631, EcoMod.
    2. Lok Nath Bhusal & Pritam Singh, 2011. "Externally Determined Development: Does Indo-China Rivalry Explain Nepal’s Underdevelopment?," Millennial Asia, , vol. 2(2), pages 163-186, July.
    3. 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.
    4. Yadav Mani Upadhyaya, "undated". "Impact Of Japanese Foreign Aid: An Analysis On Economic Development Of Nepal," Review of Socio - Economic Perspectives 202072, Reviewsep.
    5. Ismahene Yahyaoui & Najeh Bouchoucha, 2021. "The long‐run relationship between ODA, growth and governance: An application of FMOLS and DOLS approaches," African Development Review, African Development Bank, vol. 33(1), pages 38-54, March.
    6. Innocent .U. Duru & Bartholomew .O.N. Okafor & Millicent Adanne Eze & Gabriel .O. Ebenyi, 2020. "Foreign Aid and Economic Growth: Empirical Evidence from Nigeria," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 35-50.
    7. Jing Shao & Maojun Wang, 2022. "Revisiting economic effectiveness of foreign aid: The case of Japanese aid to China," The World Economy, Wiley Blackwell, vol. 45(7), pages 2284-2304, July.
    8. Thomas Bwire & Oliver Morrissey & Tim Lloyd, 2013. "Foreign Aid, Public Sector and Private Consumption: a Cointegrated Vector Autoregressive Approach," WIDER Working Paper Series wp-2013-094, World Institute for Development Economic Research (UNU-WIDER).
    9. Omenda Purity Awino & Urbanus Mutuku Kioko, 2022. "The Effect of Official Development Assistance Aid on Economic Growth and Domestic Savings in Kenya," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 12(4), pages 63-77.

    More about this item

    Keywords

    Growth; Foreign Aid; Good Policy; Cointegration Test; Error Correction Model;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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