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The Macroeconomic Impact of Foreign Aid in Bangladesh Before and After the Paris Declaration

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  • Nuzat Tasnim Dristy

    ()

    (University of Glasgow)

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    Foreign aid effectiveness has been a hot topic for several decades. Bangladesh has been receiving foreign assistance since its independence in 1971 and has taken various initiatives in enhancing the effectiveness of aid. The signing of the Paris Declaration is one such initiative where the government has committed to improve aid delivery and management so as to ensure the proper utilization of aid in its development programs. This paper examines the impact of foreign aid on Bangladesh’s economic growth before and after the signing of the Paris Declaration in 2005. The result of the analysis is such that there is almost no change in the aid-growth relationship before and after adopting the Paris Declaration principles. Moreover, even though aid-dependency and Dutch Disease effects were always minimal in Bangladesh, the inflow of external assistance was to some extent volatile in the pre-declaration phase. However, the fluctuation of aid has not progressed further in the post-declaration phases. Hence, the overall macroeconomic impact of foreign aid remains the same, concluding that the Paris declaration has not yet played a constructive role in enhancing the aid-growth relationship within the economy.

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    File URL: http://www.bangladeshstudies.org/files/WPS_no32.pdf
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    Paper provided by Bangladesh Development Research Center (BDRC) in its series Bangladesh Development Research Working Paper Series (BDRWPS) with number BDRWPS No. 32.

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    Length: 32 pages
    Date of creation: Nov 2016
    Handle: RePEc:bnr:wpaper:32
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    Web page: http://www.bangladeshstudies.org/
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    1. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    2. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    3. Conners & Thomas A. Connors, 1979. "The apparent effects of recent IMF stabilization programs," International Finance Discussion Papers 135, Board of Governors of the Federal Reserve System (U.S.).
    4. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    5. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    6. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
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