FOREIGN AID AND ECONOMIC GROWTH: NEW EVIDENCE FROM PANEL COINTEGRATION

Abdulnasser Hatemi-J and Manuchehr Irandoust ()
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Manuchehr Irandoust: Department of Economics, University of Orebro

Journal of Economic Development, 2005, vol. 30, issue 1, 71-80

Abstract: The relationship between foreign aid and economic growth is investigated for a panel of developing countries (Botswana, Ethiopia, India, Kenya, Sri-Lanka, and Tanzania) over the period 1974-1996. The results reveal that the variables contain a panel unit root and they cointegrate in a panel perspective. The long-run elasticities (close to one for most countries) show that foreign aid has a positive and significant effect on economic activity for each country in the sample. A policy implication which may be drawn from the study is that foreign capital flows can have a favorable effect on real income by supplementing domestic savings.

Keywords: Foreign Aid; Economic Growth; Panel Unit Root Tests; Panel Cointegration; Africa; Asia (search for similar items in EconPapers)
JEL-codes: C32 F35 O11 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:30:y:2005:i:1:p:71-80

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