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Foreign Financial Aid, Government Policies and Economic Growth: Does the Policy Setting in Developing Countries Matter?

Author

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  • Yusuf Tashrifov

    (The National bank of Tajikistan, Dushanbe, Tajikistan)

Abstract

Does foreign aid contribute to economic growth? If so, is the impact of aid conditional on good policies? This is a controversial issue. While the World Bank (1998) contends that the aid is effective only if recipient governments have good policies, others refute this view and argue that aid enhances economic growth regardless of the type of policies. This paper proposes new measures of policy that are more directly controlled by recipient governments and examines whether any signifi cant relationship exists between foreign aid, government policies and economic growth. It is revealed that foreign aid has a positive impact on real growth per capita and this effect is not contingent upon the type of economic policies adopted by the recipient countries.

Suggested Citation

  • Yusuf Tashrifov, 2012. "Foreign Financial Aid, Government Policies and Economic Growth: Does the Policy Setting in Developing Countries Matter?," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 15(1), pages 1-22, May.
    • Handle: RePEc:zag:zirebs:v:15:y:2012:i:2:p:1-20
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    Citations

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    Cited by:

    1. Shaomeng Jia & Claudia R. Williamson, 2019. "Aid, Policies, And Growth: Why So Much Confusion?," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 577-599, October.

    More about this item

    Keywords

    World Bank; Foreign Aid; Government Policies; Economic Growth and Generalised Method of Moments;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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