Foreign aid and economic growth: an econometric study of bangladesh

Islam, Anisul M.

doi:10.1080/00036849200000067

Cited by 76 publications

(61 citation statements)

References 9 publications

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“…Proponents of aid argue that overseas capital flows are necessary for the economic growth of developing countries (Chenery and Strout, 1966;Papenek, 1973;Levy, 1987;and Islam, 1992;Fayissa and El-Kaissy, 1999). On the other hand, opponents of foreign aid argue that it has a negative effect on domestic savings and economic growth in less developed countries (see, Heller, 1975 andBoone, 1994).…”

Section: An Empirical Model Of Economic Growth With Remittancesmentioning

confidence: 99%

The Impact of Remittances on Economic Growth and Development in Africa

Fayissa

Nsiah

2010

The American Economist

166

121

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For more than half a century, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to capital investment and technological change, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas and research and development. The positive or negative impacts of the above listed traditional sources of economic growth have been well documented in literature. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the direct or indirect relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using an unbalanced panel data spanning from 1980 to 2004 for 37 African countries. We find that remittances boost growth in countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.

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Section: An Empirical Model Of Economic Growth With Remittancesmentioning

confidence: 99%

The Impact of Remittances on Economic Growth and Development in Africa

Fayissa

Nsiah

2010

The American Economist

166

121

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“…Using time series data from 1972 to 1988, Islam (1992) suggested a weak positive relationship between aid and growth in Bangladesh. Although grants and food aid were found to be more effective than community and project aid; however, in general, foreign resources seemed to have less impact on growth compared to domestic resources.…”

Section: Empirical Literature On South Asian Countriesmentioning

confidence: 99%

Aid-Growth Nexus in South Asia: Evidence from Time Series and Panel Cointegration

Chowdhury

Das

2011

RAE

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Given the strong likelihood of a sharp decline in remittance flows because of the recent recession, coupled with limited access to the global capital market, foreign aid inflow in South Asia can play an important role in boosting economic growth in this region. In the existing literature, the relationship between foreign aid and per capita real GDP is rather inconclusive. Does aid work in South Asia? We answer this question for five economies in this region: Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Using both country-specific time series and a recently developed panel cointegration procedure over the period 1976 to 2008, our results suggest a positive long run relationship between growth rate of per capita real GDP and aid as a percentage of GDP for four out of five countries. Hence, this investigation tends to support the aid effectiveness hypothesis for South Asian countries.

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“…For instance, proponents such as Chenery and Strout (1966), Papenek (1973), Levy (1987, Islam (1992), Fayissa and El-Kaissy (1999) argue that foreign capital inflows are essential for growth in developing countries. However, Heller (1975), and Boone (1994) contend that foreign capital inflows have negative effects on domestic savings and economic growth in developing countries.…”

Section: Rem Was Included To Capture the Impact Of Remittances On Endmentioning

confidence: 99%

Financial development, international migrant remittances and endogenous growth in Ghana

Adenutsi

2011

Studies in Economics and Finance

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Purpose: This paper seeks to provide further insights into understanding the finance-growth nexus by verifying the hypothesis that financial development promotes economic growth through its capacity to attract increased international migrant remittances to Ghana. Design/Methodology/Approach: A dynamic equilibrium-correction mechanism model for the period 1987(3)- 2007(4) was estimated following the Johansen cointegration procedure. This approach produced maximum likelihood estimators of the unconstrained cointegrating vector, and suggested the number of cointegrating vectors without relying on an arbitrary normalization. Findings: The findings reveal two stylized facts with reference to Ghana. First, although financial development Granger-causes international migrant remittance inflows, it is in itself directly detrimental to endogenous growth. Second, international migrant remittance inflows are statistically significant in explaining variations in endogenous growth in the short run as well as in the long run. Practical Implications: Since directly, financial development hampers endogenous growth, but Granger-causes increased inflows of migrant remittances, and these remittances impact positively but marginally on endogenous growth, it follows that the sequencing of implementing Ghana's financial reform programmes should be reexamined, whilst an enabling environment is created to induce Ghanaians living abroad to remit home through official channels. Originality/Value: International migrant remittances were found to be statistically significant in promoting endogenous growth, albeit marginally. Financial development does not directly engender growth, unless it succeeds in attracting non-debt foreign capital in the form of remittances through the formal sector. Financial development causes migrant remittance inflows which impact positively on growth. Keywords: Financial Development, Economic Growth, International Migrant Remittances, Ghana INTRODUCTIONA well-functioning financial sector is expected to attract idle funds for financing economic growth and development projects. Generally, international migrant remittances are highly significant to low-income economies constituting about 2% of their gross domestic product (GDP) and 6.2% of their imports (World Bank, 2003). Besides, these remittances have, in recent years, surpassed foreign direct investment or official development assistance, export revenues, and foreign aid (Giuliano and Ruiz-Arranz, 2005; World Bank, 2006). Consequently, in recent years, international migrant remittance flows to developing countries have attracted the attention of policymakers, researchers and scholars. The rising interest and enquiry into the continuous increasing remittance flows to developing countries, notwithstanding, experts have expressed divergent views on its implications for economic growth and development. On one hand, remittances are believed to be a catalyst for accelerated economic growth and development as they increase purchasing power of households and se...

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Foreign aid and economic growth: an econometric study of bangladesh

Cited by 76 publications

References 9 publications

The Impact of Remittances on Economic Growth and Development in Africa

The Impact of Remittances on Economic Growth and Development in Africa

Aid-Growth Nexus in South Asia: Evidence from Time Series and Panel Cointegration

Financial development, international migrant remittances and endogenous growth in Ghana

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