IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/30344.html
   My bibliography  Save this paper

Foreign assistance and economic growth: evidence from Pakistan 1972 - 2010

Author

Listed:
  • Ahmed, Vaqar
  • Wahab, Mohammad Abdul

Abstract

This paper examines the relationship between foreign assistance and economic growth for the period 1972 to 2010. Past literature indicates that due to low domestic resource mobilization Pakistan had to resort to various forms of foreign assistance on a regular basis. Using time series data since 1972 and employing Johansen maximum likelihood procedure we show that foreign assistance in the absence of macroeconomic stabilization and structural reforms has a negative relationship with real per capita GDP. However national savings as percentage of GDP show a positive relationship with real per capita GDP. Pakistan has a long history of dependence on multilateral and bilateral development partners. Over the decades the share of grants as percentage of total foreign assistance has declined forcing the country to procure loans at harsh conditionalties. Given the positive impact of national savings on economic growth there is an urgent need for improving the tax base, promoting instruments that encourage savings culture in the private sector and attracting remittances from abroad. These increased savings would then have to be channelized towards productive investments which in turn require pro market reforms.

Suggested Citation

  • Ahmed, Vaqar & Wahab, Mohammad Abdul, 2011. "Foreign assistance and economic growth: evidence from Pakistan 1972 - 2010," MPRA Paper 30344, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30344
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/30344/1/MPRA_paper_30344.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Boriana Yontcheva & Mrs. Nadia Masud, 2005. "Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid," IMF Working Papers 2005/100, International Monetary Fund.
    2. Shahrukh Rafi Khan, 1997. "Has Aid Helped in Pakistan?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(4), pages 947-957.
    3. Pernilla Johansson, 2011. "Grants to Needy Countries? A Study of Aid Composition between 1975 and 2005," Development Policy Review, Overseas Development Institute, vol. 29(2), pages 185-209, March.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
    6. Ahmed, Vaqar & Wahab Siddiqui, Abdul, 2010. "Nexus between aid and security: the case of Pakistan," MPRA Paper 29310, University Library of Munich, Germany.
    7. Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129.
    8. Vaqar Ahmed & Cathal O'Donoghue, 2009. "Redistributive Effect of Personal Income Taxation in Pakistan," Working Papers 0143, National University of Ireland Galway, Department of Economics, revised 2009.
    9. Alberto Chong & Mark Gradstein & Cecilia Calderon, 2009. "Can foreign aid reduce income inequality and poverty?," Public Choice, Springer, vol. 140(1), pages 59-84, July.
    10. Pack, Howard & Pack, Janet Rothenberg, 1993. "Foreign Aid and the Question of Fungibility," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 258-265, May.
    11. Naheed Z. Khan & Eric Rahim, 1993. "Foreign Aid, Domestic Savings and Economic Growth (Pakistan: 1960 to 1988)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 1157-1167.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khalid Zaman & Bashir Khilji, 2014. "A note on pro-poor social expenditures," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 2121-2154, July.
    2. Nazeem ud din & Khalid Zaman & Shagufta Ashraf & Faiza Sajjad & Sundas Saleem & Uzma Raja, 2015. "Quality versus quantity in health care and educational reforms: combating poverty," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 267-293, January.
    3. Luqman, Muhammad & Haq, Mairajul & Lal, Irfan, 2013. "Foreign Aid and Macroeconomic Performance in Pakistan: Exploring the Role of Local Financial Sector Development," MPRA Paper 106866, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahmed, Vaqar & Wahab Siddiqui, Abdul, 2010. "Nexus between aid and security: the case of Pakistan," MPRA Paper 29310, University Library of Munich, Germany.
    2. 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.
    3. Muntasir Murshed, 2019. "An Empirical Investigation of Foreign Financial Assistance Inflows and Its Fungibility Analyses: Evidence from Bangladesh," Economies, MDPI, vol. 7(3), pages 1-25, September.
    4. Georgios Bertsatos & Plutarchos Sakellaris & Mike G. Tsionas, 2022. "Extensions of the Pesaran, Shin and Smith (2001) bounds testing procedure," Empirical Economics, Springer, vol. 62(2), pages 605-634, February.
    5. Mohamed, Hazik & Masih, Mansur, 2017. "Stock market comovement among the ASEAN-5 : a causality analysis," MPRA Paper 98781, University Library of Munich, Germany.
    6. M. T. Alguacil & V. Orts, 2003. "Inward Foreign Direct Investment and Imports in Spain," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 19-38.
    7. Ketenci, Natalya, 2009. "The ARDL Approach to Cointegration Analysis of Tourism Demand in Turkey: with Greece as the substitution destination," MPRA Paper 86602, University Library of Munich, Germany.
    8. Ekaterini Panopoulou, 2005. "A Resolution of the Fisher Effect Puzzle: A Comparison of Estimators," Money Macro and Finance (MMF) Research Group Conference 2005 18, Money Macro and Finance Research Group.
    9. Irene Fafaliou & Michael Polemis, 2013. "Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(1), pages 45-61, February.
    10. Dierk HERZER & Felicitas NOWAK‐LEHMANN D. & Boriss SILIVERSTOVS, 2006. "Export‐Led Growth In Chile: Assessing The Role Of Export Composition In Productivity Growth," The Developing Economies, Institute of Developing Economies, vol. 44(3), pages 306-328, September.
    11. Moayad H. Al Rasasi & John H. Qualls, 2020. "Revisiting the Demand for Money in Saudi Arabia," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 38-45.
    12. Ha, Nguyen Thi Thu & Hoa, Lam Ba, 2018. "On the Causality Relationship between Demographic Changes, Economic Growth and Domestic Savings in Vietnam," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 27-38.
    13. Kharin, Sergei, 2015. "Vertical price transmission along the diary supply chain in Russia," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 117(2), pages 1-6, August.
    14. Murthy, N. R. Vasudeva & Phillips, Joseph M., 1996. "The relationship between budget deficits and capital inflows: Further econometric evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(4), pages 485-494.
    15. Campos, Julia & Ericsson, Neil R. & Hendry, David F., 1996. "Cointegration tests in the presence of structural breaks," Journal of Econometrics, Elsevier, vol. 70(1), pages 187-220, January.
    16. Vítor Marques & Isabel Soares & Adelino Fortunato, 2012. "Application of a Structural Model to the Spanish Electricity Wholesale Market," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 65-108.
    17. Noel, Michael D., 2015. "Do Edgeworth price cycles lead to higher or lower prices?," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 81-93.
    18. Philip Hans Franses, 2001. "How to deal with intercept and trend in practical cointegration analysis?," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 577-579.
    19. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    20. Sulaiman, Saidu & Masih, Mansur, 2017. "Is liberalizing finance the game in town for Nigeria ?," MPRA Paper 95569, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign assistance; Economic Growth; National Savings;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:30344. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.