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The Impact of Foreign Aid on Economic Growth in Papua New Guinea

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  • Simon Feeny

Abstract

This article investigates the impact of foreign aid on economic growth in Papua New Guinea (PNG) using time-series data for the period 1965 to 1999. Following the most recent literature, the article examines whether aid effectiveness is conditional on levels of economic policy and governance. An empirical model is estimated using the Autoregressive Distributed Lag (ARDL) approach to cointegration proposed by Pesaran and Shin [1995]. Results provide little evidence that aid and its various components have contributed to economic growth in PNG. There is some evidence that aid is more effective during periods when the country has undertaken a World Bank Structural Adjustment Program (SAP). An alternative interpretation is that a SAP may be more effective at spurring growth when supported by foreign aid.

Suggested Citation

  • Simon Feeny, 2005. "The Impact of Foreign Aid on Economic Growth in Papua New Guinea," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 1092-1117.
    • Handle: RePEc:taf:jdevst:v:41:y:2005:i:6:p:1092-1117
    DOI: 10.1080/00220380500155403
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    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
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