Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Growth effect of foreign aid and volatility in South Asia

Growth effect of foreign aid and volatility in South Asia Purpose – South Asia has been an important destination of foreign aid over the past decades. Since a large part of aid is disbursed for social and economic infrastructure development in South Asian countries, and the volume of aid has tremendously increased in recent years, the purpose of this study is to investigate how far various categories of foreign aid affects economic growth rate in these countries. In addition, as the trend of each category of aid transfer appears to have been volatile, this study also investigates whether the volatilities inhibit growth rate in these countries. Design/methodology/approach – In this study, South Asia refers to India, Bangladesh, Pakistan and Sri Lanka. The Random effects approach is employed incorporating panel data for the period of 1995‐2008. The aggregate foreign aid is classified into various categories to have a comprehensive investigation. Findings – Foreign aid positively associated with growth whereas the volatility of aid hurts it. Long‐impact aid promotes growth more than short‐impact aid does. The volatility of short‐impact aid hurts growth, whereas the volatility of long‐impact aid has no effect on it. Pure aid and its volatility have no effect on growth. Originality/value – This study has identified the structure of foreign aid disbursed in these countries, and explored how far each category and respective volatility affects growth. These findings would be useful to the scholars and policy makers in the recipient countries as well as donors, to make foreign aid much more effective in future. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Development Issues Emerald Publishing

Growth effect of foreign aid and volatility in South Asia

Loading next page...
 
/lp/emerald-publishing/growth-effect-of-foreign-aid-and-volatility-in-south-asia-0XYZR0h4WT
Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1446-8956
DOI
10.1108/14468951111165340
Publisher site
See Article on Publisher Site

Abstract

Purpose – South Asia has been an important destination of foreign aid over the past decades. Since a large part of aid is disbursed for social and economic infrastructure development in South Asian countries, and the volume of aid has tremendously increased in recent years, the purpose of this study is to investigate how far various categories of foreign aid affects economic growth rate in these countries. In addition, as the trend of each category of aid transfer appears to have been volatile, this study also investigates whether the volatilities inhibit growth rate in these countries. Design/methodology/approach – In this study, South Asia refers to India, Bangladesh, Pakistan and Sri Lanka. The Random effects approach is employed incorporating panel data for the period of 1995‐2008. The aggregate foreign aid is classified into various categories to have a comprehensive investigation. Findings – Foreign aid positively associated with growth whereas the volatility of aid hurts it. Long‐impact aid promotes growth more than short‐impact aid does. The volatility of short‐impact aid hurts growth, whereas the volatility of long‐impact aid has no effect on it. Pure aid and its volatility have no effect on growth. Originality/value – This study has identified the structure of foreign aid disbursed in these countries, and explored how far each category and respective volatility affects growth. These findings would be useful to the scholars and policy makers in the recipient countries as well as donors, to make foreign aid much more effective in future.

Journal

International Journal of Development IssuesEmerald Publishing

Published: Sep 20, 2011

Keywords: Foreign aid; Growth rate; Volatility; South Asia

References