Development Effectiveness of Foreign Assistance (original) (raw)

Evaluating the Impact of Foreign Aid on Economic Growth: A Cross-Country Study

Journal of economic development, 2005

One branch of the literature on aid effectiveness attempts to measure the contribution of foreign aid to the growth of developing countries. The micro results are clear and encouraging: foreign aid is beneficial to economic growth. However, until recently, the macro results were inconclusive: the impact of aid on growth was positive, negative, or even non-existent, in statistical terms. This contradiction is known as the i°micro-macro paradoxi±. Certain methodological and econometric flaws inherent in the assessments being carried out up to the mid-nineties may provide an explanation for the misleading macro results. Examining a large panel data set, I have found that foreign aid has had a positive impact on economic growth. In light of these findings, I conclude that earlier-generation work is in accordance with the new and recent generation of aid effectiveness studies. Thus, less importance should be attributed to the i°micro-macro paradoxi± as an overall appraisal of aid effecti...

On the Link between Foreign Aid and Growth in Developing Countries

2021

Objectives: This study aims to highlight some of the main debates on the aid-growth nexus from theoretical and empirical perspectives. Prior Work: Despite the intense debate on whether aid works for growth, the increasing trends of aid flows to developing countries motivates this study to revisit these debates. Approach: This study uses a detailed survey of theoretical and empirical literature on the aid-growth nexus. Results: This review finds that the aid-growth nexus is the most empirically researched area, and yet evidence remains inconsistent and controversial. Two lines of debate are identified, namely aid effectiveness (aid proponents) and aid ineffectiveness (aid opponents). While aid proponents argue that aid positively affects growth, aid opponents find that aid either has a negative or null impact on growth. Implications: Contrary to scholarly debates, the common belief among donors is that the effect of aid on growth is positive and aid flows to the productive/economic s...

Foreign Aid Impact to the economic growth of the developing countries by Dr. Kao Kveng Hong

Foreign aid plays a key role in promoting economic growth of a number of Third World countries. The role of foreign aid in promoting economic development of the recipient economies is explained in terms in terms of concepts. Such as "the saving gap" and "the foreign exchange gap". However, the role of foreign aid in the growth process of developing countries has been a topic of intense debate. Empirical studies have largely failed to provide a conclusive picture as to the extent that aid contributes to economic growth and development. In this context, the present paper attempts to analyze the foreign aid positions and examine the impact of foreign aid on the economic growth of the four counties in southeast Asia, such as Cambodia, Lao PDR, Vietnam, and under developing countries, commonly known as Indochina nations and Myanmar (IM). Further, in the light of the poorness of the selected economies, examining the role of foreign aid in enhancing the economic growth of the under developing countries and Indochina nations assumes special significance. The study revealed that in all the years under study, while Vietnam was the largest; Myanmar was the smallest recipient of foreign aid. Foreign aid flows to Indochina nations during the period 2000 to 2009 though mostly had increased, but aid as a percentage to GDP of the respective economies had fallen during the same period. The same period. For the Indochina nations as a whole, foreign aid as a percentage to FDP was 5.62 in 2000 which had fallen to 3.57 in 2009. Though the foreign aid flows to Lao PDR was much smaller as compared to Cambodia and Vietnam, aid per recipient of Lao PDR was highest in all the year (2000 to 2009) among all the four countries.

Impact of Foreign Aid on Economic Growth

2016

There is significant increase in foreign inflows, but the economic growth achieved by many Sub Saharan African countries has not been satisfactory. Thus, the actual role of foreign capital inflow has been an area of controversy. Kenya has been one of the major recipients of international aid. It is evident that despite notable donor intervention in the country‘s economy, less economic growth and poverty remain inherent for many years. Despite this paradoxical scenario, there are few researches capturing the attention of assessing the effectiveness of aid in such a country in order to find out whether aid has been effective, or whether, in fact, the persistent poverty in such an aid-dependent country is not the result of the ineffectiveness of aid. So far done studies are controversial. The study by Abeba (2002) in Ethipia for example shows that aid has negative impact on economic growth while the study by Tasew (2010) and Yohannes (2011) found that aid has positive impact on economi...

Review of Theoretical and Empirical Literatures on the Role of Foreign Aid to Developing Countries

Journal of Economics and Sustainable Development, 2014

This study provides reviews relating to the impact of foreign aid to economic growth. Several literatures suggested that, foreign aid has a directly positive impact of the economic growth. However, some studies empirically proved that, good economic environment is main prerequisites to ensure the positive impact of foreign aid to the economic growth. Furthermore, several studies have shown that, foreign aid has negative impact of the economic growth. Most of studies in previous literature has been analyzed the relationship between foreign aid and economic growth in East Asian economies and not in African countries. From this gap, new empirical studies in to examine the channels in which foreign aid affect economic growth is needed especially in African economies, which receive largest foreign aid for long time.

Foreign Aid and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa

Theoretical Economics Letters

This study aims at understanding the impact of foreign aid on the economic growth of the Sub Saharan African region. Despite being the largest foreign aid recipient in the world, the region is the poorest with the lowest Human Development Index (HDI) and Gross National Income (GNI) per capita. This raises serious questions about the effectiveness of foreign aid to the economic growth and development of the region. As such, we examine the relationship between foreign aid, determined by the official development assistance (ODA), and the economic growth rate of the Sub Saharan Africa's ten largest recipients of foreign aid, for a 23-year period from 1990 to 2012. These ten countries include Ethiopia,

IMPACT OF FOREIGN AID IN THE ECONOMIC DEVELOPMENT OF RECIPIENT COUNTRY

Journal of the Bangladesh Association of Young Researchers (JBAYR), 2014

Foreign aid, economic growth and economic development are burning issues confronting development economists and researchers today. This is simply because some of the researchers support the view that foreign aid lead to growth while others argue that aid does not contribute to economic growth and thus have a negative impact on economic development in the recipient country. Since the 1960s, foreign aid starts its journey, but still there are controversial arguments on whether the major aim for its institution has been achieved or not. Foreign aid is the donations of money, goods, or services from one nation to another. Such donations can be made for a humanitarian, altruistic purpose, or to advance the national interests of the giving nation. Aid can be between two (bilateral) or many (multilateral) countries/institutions. Bilateral aid is usually tied aid (conditional aid) is when recipients must purchase products/ services from the donor country. Multilateral aid is usually untied aid that can be spent in any sector of the recipient country. This is a literature review and for that reason no separate literature review is given here. One of the limitations of the study is that it doesn’t observe any trends of any particular economic entity on the basis of empirical evidences. More importantly, this analysis is not country specific so it may create ambiguity if someone plans to relate with any particular economic unit. The excuse of those limitations is that this study is not a quantitative analysis rather a general discussion regarding the role foreign aid in economic development.