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The Impact of Foreign Aid in Economic Growth: An Econometric Analysis of Bangladesh

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  • Binata Rani Sen
  • Tania Islam
  • Aminun Nahar
  • Md. Farid Dewan

Abstract

Foreign aid is one of the most important policy tools that rich countries use for helping poor countries to improve population well-being and facilitate economic and institutional development. Bangladesh shows much dependency on the developed countries like as foreign aid. We have a great contribution of foreign aid in our GDP. The empirical evidence on its benefits is mixed and has generated much controversy. This paper estimates six separate models by investigating the 20 years data for 1996-97 to 2015-16 periods in Bangladesh which shows that foreign aid to very poor countries accounts for very little of total global aid; reviews the evidence that foreign aid is often determined by the objectives of donor countries rather than the needs of the recipient countries; argues that the evidence on the impact of aggregate foreign aid is hindered by problems of measurement and identification, which are partly due to the different nature of aid. Application of this study is to identify the role of foreign aid in our economy. This study takes an important role by giving information about the real growth of the economy of Bangladesh after taking foreign aid from foreign countries.

Suggested Citation

  • Binata Rani Sen & Tania Islam & Aminun Nahar & Md. Farid Dewan, 2019. "The Impact of Foreign Aid in Economic Growth: An Econometric Analysis of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 3(2), pages 138-145.
    • Handle: RePEc:aif:journl:v:3:y:2019:i:2:p:138-145
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    References listed on IDEAS

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    1. Christopher S. Adam & David L. Bevan, 2006. "Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries," The World Bank Economic Review, World Bank, vol. 20(2), pages 261-290.
    2. Adam, Christopher & Chambas, Gerard & Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane & Gunning, Jan Willem, 2004. "Performance-Based Conditionality: A European Perspective," World Development, Elsevier, vol. 32(6), pages 1059-1070, June.
    3. Nuzat Tasnim Dristy, 2016. "The Macroeconomic Impact of Foreign Aid in Bangladesh Before and After the Paris Declaration," Bangladesh Development Research Working Paper Series (BDRWPS) BDRWPS No. 32, Bangladesh Development Research Center (BDRC).
    4. Mr. Tsidi M Tsikata, 1998. "Aid Effectiveness: A Survey of the Recent Empirical Literature," IMF Policy Discussion Papers 1998/001, International Monetary Fund.
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    Cited by:

    1. Md Ismail Hossain & Md Istiak Hossain & Mollah Aminul Islam & Md Reza Sultanuzzaman, 2022. "Does Foreign Aid Have an Expected Role in the Economic Growth of Bangladesh? An Analysis in ARDL Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 12(6), pages 113-126, November.

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