DOES FOREIGN AID HELP OR HINDER THE INSTITUTIONAL QUALITY OF THE RECIPIENT COUNTRY? NEW EVIDENCE FROM THE OIC COUNTRIES

Mohammad Ashraful Chowdhury, Mohamed Ariff, Abul Masih and Izlin Ismail
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Mohamed Ariff: ��INCEIF, Kuala Lumpur, Malaysia
Izlin Ismail: �Department of Finance & Banking, University of Malaya, Malaysia

The Singapore Economic Review (SER), 2022, vol. 67, issue 01, 189-218

Abstract: This study examines the impact of foreign aid on the institutional quality (IQ) of the OIC countries. Using the data of OIC countries for the three-year average period from 1991 to 2016, the system GMM finds that aid in general deteriorates the IQ for the aid recipient countries. However, quantile regression suggests that the negative impact of foreign aid on institutional quality (IQ) is relatively greater in the countries where the existing quality of institution is poor. The findings of the study suggest that improving the existing capacity is essential for reaping the optimum benefit of foreign aid on institutional development.

Keywords: Foreign aid; institutional quality; OIC countries; system GMM; quantile regression (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217590819420037

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