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Foreign Aid-Blessing or Curse: Evidence from Pakistan

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Author Info

  • Muhammad Arshad Khan

    (Pakistan Institute of Development Economics, Islamabad.)

  • Ayaz Ahmed

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

The role of foreign aid in promoting economic growth is a debatable issue and remains unsettled at both theoretical and empirical levels. Pakistan has received a substantial amount of foreign aid since its Independence in 1947 but little improvement has been observed in its socio-economic development. This study considers the question as to whether foreign aid is a blessing or a curse for Pakistan. The empirical analysis is based on the ARDL cointegration approach. We examine the aid-growth link at the aggregate and disaggregate levels for the period 1972 2006. The results show negative and insignificant effects of foreign aid on the growth at the aggregate as well at the disaggregate level. The findings further suggest that domestic investment, export growth, and inflows of foreign direct investment are important contributors in enhancing economic growth in Pakistan.

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File URL: http://www.pide.org.pk/pdf/PDR/2007/Volume3/215-240.pdf
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Bibliographic Info

Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 46 (2007)
Issue (Month): 3 ()
Pages: 215-240

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Handle: RePEc:pid:journl:v:46:y:2007:i:3:p:215-240

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Related research

Keywords: Foreign Aid; Economic Growth; FDI; Cointegration;

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Cited by:
  1. Muhammad Javid & Abdul Qayyum, 2011. "Foreign Aid and Growth Nexus in Pakistan: The Role of Macroeconomic Policies," PIDE-Working Papers 2011:72, Pakistan Institute of Development Economics.

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