Foreign aid and growth in Nepal: an empirical analysis

Badri Prasad Bhattarai ()
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Badri Prasad Bhattarai: University of Western Sydney, Australia

Journal of Developing Areas, 2009, vol. 42, issue 2, 283-302

Abstract: Using cointegration and error correction mechanism, this paper investigates the effectiveness of aid in Nepal during the period 1983-2002. Specifically, it examines the long-run relationship between aid and per capita real GDP. To address the current debate on whether aid works only in a good policy environment, we have included policy variables for macroeconomic stability, financial sector development and openness in an extended model. The results show that foreign aid has a positive and statistically significant effect on per capita real GDP in the long-run. More importantly, aid effectiveness improves in the presence of good policy environment.

Keywords: Growth; Foreign Aid; Good Policy; Cointegration Test; Error Correction Model (search for similar items in EconPapers)
JEL-codes: F35 O23 O40 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.42:year:2009:issue2:pp:283-302

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