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Effectiveness of Foreign Aid in Facilitating Foreign Direct Investment: Evidence from Four South Asian Countries

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  • T. Bhavan

Abstract

This empirical study investigates whether foreign aid is effective in facilitating foreign direct investment inflows into the selected South Asian countries during the period of 1995-2012. Using panel data, the fixed-effects estimator is employed. The results derived from this study suggest that infrastructure aid is effective in facilitating FDI into the South Asian countries of which aid for social infrastructure is relatively more effective than that of other types of aid. In the donor side, aid from UK has significant effect on FDI whereas aid from USA, Germany and Netherlands has marginal effect. The aid from Japan does not facilitate FDI flow into these recipient countries.

Suggested Citation

  • T. Bhavan, 2014. "Effectiveness of Foreign Aid in Facilitating Foreign Direct Investment: Evidence from Four South Asian Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(12), pages 1770-1783.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:12:p:1770-1783:id:1304
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    Cited by:

    1. Liao, Hongwei & Chi, Yedi & Zhang, Jiarui, 2020. "Impact of international development aid on FDI along the Belt and Road," China Economic Review, Elsevier, vol. 61(C).
    2. Liu, Ailan & Wang, Zhixuan & Zhu, Pengcheng, 2021. "Does informal economy undermine the effects of China’s aid on its outward foreign direct investment?," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 315-329.

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