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Foreign Aid to Bangladesh: Some Iconoclastic Issues

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  • Khandokar Mohammad Istiak

    (University of Dhaka, Bangladesh)

Abstract

The famous 'Two Gap' economic theory suggests that an injection of foreign aid raises investment and savings of a country. However, a number of empirical studies have found that foreign aid has actually supplanted savings in many countries. The paper investigates the relationship between aid and gross domestic savings in Bangladesh and finds that these two variables are independent and have no effects on each other, which are different findings compared to other studies. Moreover, this paper concentrates on the capacity of Bangladesh economy to bear the obligation of foreign aid. Unlike some other papers, this one finds out that although the interest payment and total debt service charge of the loan are increasing, it is not a mishap because export earnings and income of economy of Bangladesh are increasing sufficiently enough to bear the burden. So, against the conventional characteristics of foreign aid to Bangladesh, this paper introduces some new issues about it.

Suggested Citation

  • Khandokar Mohammad Istiak, 2012. "Foreign Aid to Bangladesh: Some Iconoclastic Issues," Journal of Developing Areas, Tennessee State University, College of Business, vol. 46(1), pages 331-343, January-J.
    • Handle: RePEc:jda:journl:vol.46:year:2012:issue1:pp:331-343
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    More about this item

    Keywords

    Aid; Savings; Granger Causality; Stationary; Debt service;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F35 - International Economics - - International Finance - - - Foreign Aid

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