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Foreign Aid, External Debt and Economic Growth Nexus in Low-Income Countries: The Role of Institutional Quality

Author

Listed:
  • Unbreen Qayyum

    (Pakistan Institute of Development Economics, Islamabad)

  • Adnan Haider

    (Institute of Business Administration, Karachi, Pakistan)

Abstract

Institutional quality plays an important role in promoting economic development of a nation. Foreign capital can work efficiently and its productivity will be high if the quality of institution is good. This study attempts to investigate empirically the impact of external debt and foreign aid on economic growth by taking into consideration the quality of institution in terms of effective governance. Annual data for the period 1984 to 2010 has been taken from a panel of sixty developing countries. Empirical results indicate that the good governance and foreign aid affect the economic growth positively while that of external debt has a negative impact. These results are robust for various alternative specifications.

Suggested Citation

  • Unbreen Qayyum & Adnan Haider, 2012. "Foreign Aid, External Debt and Economic Growth Nexus in Low-Income Countries: The Role of Institutional Quality," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 97-116.
    • Handle: RePEc:pid:journl:v:51:y:2012:i:4:p:97-116
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    File URL: http://www.pide.org.pk/pdf/PDR/2012/Volume4/97-116.pdf
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    Citations

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    Cited by:

    1. Nurfilzah Arham & Mohd Shamlie Salisi & Rozita Uji Mohammed & Jasman Tuyon, 2020. "Impact of macroeconomic cyclical indicators and country governance on bank non-performing loans in Emerging Asia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 707-726, December.
    2. M. Ali Kemal & Anum Jilani, 2016. "Impact of Foreign Aid in Education on Educational Outcomes," PIDE-Working Papers 2016:139, Pakistan Institute of Development Economics.
    3. Karim Bouchrara & Houssem Rachdi & Khaled Guesmi, 2020. "The Non-Linear Relationship Between Economic Growth and Public Debt," Economics Bulletin, AccessEcon, vol. 40(3), pages 2336-2343.
    4. Omotor, Douglason G., 2019. "A Thrifty North and An Impecunious South: Nigeria's External Debt and the Tyranny of Political Economy," MPRA Paper 115292, University Library of Munich, Germany, revised 12 Oct 2019.
    5. Muhammad Shahid & Khalil Ahmad & Muhammad Mudassar Naushahi & Muhammad Amir Inayat, 2024. "Tax Decentralization and Economic Growth of Pakistan: The Role of Political Institutions," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 78-88.
    6. Nwaoha, William Chimee & Ejem, Chukwu Agwu & Egwu, Charles Chukwudinma & Ugoji-Eke, Patience Nnenna & Nwabeke, Chidinma Elizabeth, 2017. "An Error Correction Model Analysis of the Effect of Total External Debt on the Nigerian Economy (1980–2015)," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 3(8), pages 119-129, 08-2017.
    7. Unbreen Qayyum & Hasan Siftain, 2014. "Governance and the Effectiveness of Foreign Capital," PIDE-Working Papers 2014:98, Pakistan Institute of Development Economics.
    8. Adeela Hussain & Muhammad Irfan Chani, 2018. "Remittances, Foreign Debt and Economic Growth: A Cross Country Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 7(2), pages 59-71, June.

    More about this item

    Keywords

    Foreign Aid; External Debt; Economic Growth; Governance;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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