Do Foreign Grants and Capital Formation Indeed Impact Economic Growth? An Empirical Evidence from Bangladesh

K M Saemon Islam and Gautam Kumar Biswas

European Journal of Development Studies, 2023, vol. 3, issue 3, 139-146

Abstract: The paper examined how the growth of the foreign grants and the growth of gross fixed capital formation impact the growth of GDP in Bangladesh. We studied the relationships between those variables for a period spanning between 1983 and 2017. The Johansen cointegration test indicated that there is a long-run relationship between the variables. Therefore, by employing a vector error correction model (VECM), we found that previous year’s divergence between the variables adjusted by 69% in the following year. The study also found that both foreign grants, and the gross fixed capital formation had a positive impact on GDP growth in Bangladesh.

Keywords: Cointegration; Economic Growth; Error Correction Model; Foreign Aid (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:epw:develo:v:3:y:2023:i:3:id:15280

DOI: 10.24018/ejdevelop.2023.3.3.280

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