Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
Volume 3
Issue 3
Online publication date 2010-10-14
Title Growth effect of aid and its volatility: An individual country study in South Asian economies
Author T. Bhavan, Changsheng Xu, Chunping Zhong
Abstract This paper empirically investigates the growth effect associated with aid and its volatility during the period 1995-2008 in the case of five South Asian economies. The aid is classified into short impact, long impact and humanitarian aid. We obtained results for each of the country by employing two-stage least squares method. The results suggest that gross aid is positively associated with growth rate where as its volatility negatively effects growth rate South Asian countries. Short impact and long impact aid positively effect on growth rate whereas respective aid volatilities have negative affects on all the economies, excluding at least one country in each case. Humanitarian aid and its volatility have mixed results. Thus, we come to a conclusion that, aid and aid volatility have strong association with growth rate in the South Asian countries, but varies considerably from country to country in terms of magnitude of effect and in relation to the growth rates.
Citation
References
Arellano, C., Bulir, A., Timothy and Lipschitz, L., 2009. “The dynamic implications of foreign aid and its variability,” Journal of Development Economics, Vol.88, pp. 87-102

Asteriou, D., 2009. “Foreign aid and economic growth: New evidence from a panel data approach for five South Asian countries,” Journal of Policy Modeling, Vol.31, pp.155-61

Bulir, A. and Hamann, A., 2008. “Volatility of development aid: From the frying pan into the fire?”, World Development, Vol.36, pp.2048-2066

Burnside, C. and Dollar, D., 2000. “Aid, policies, and growth,” The American Economic Review, Vol.4, No.90, pp.847-868

Chauvet, L., 2002. “Socio-political instability and the allocation of international aid by donors,” European Journal of Political Economy, Vol.19, pp.33-59

Dalgaard, C., and Hansen, H., 2001. “On aid, growth and good policies,” The Journal of Development Studies, Vol.37,No.6, pp.17-41

Doucouliagos, H. and Paladam, M., 2009. “Aid effectiveness on growth: A meta study,” European Journal of Political Economy, Vol.24, pp.1-24

Feeny, S. and McGillivray, M., 2003. “Aid and public sector borrowing in developing countries,” Journal of International Development, Vol.15, pp.989-98

Hansen, H. and Tarp, F., 2000. “Aid effectiveness disputed,” Journal of International Development, Vol.12, pp.375-98

Hudson, J. and Mosley, P., 2008a. “Aid volatility, policy and development,” World Development, Vol.36, pp.2082-102

Hudson, J. and Mosely, P., 2008b. “The macroeconomic impact of aid volatility,” Economics Letters, Vol.99, pp.486-89

Mavrotas, G., 2005. “Aid heterogeneity: Looking at aid effectiveness from a different angle,” Journal of International Development, Vol.17, pp.1019-1036

McGillivray, M. and Morrissey, O., 2000. “Aid fungibility in assessing aid: Red herring or true concern?”, Journal of International Development, Vol.12, pp.413-28

McGillivray, M. and Ouattara, B., 2005. “Aid, Debt Burden and Government Fiscal Behaviour in Cote d’Ivoire,” Journal of African Economies, Vol.14, pp.247-69

McGillivray, M., Feeny, S., Hermes, N. and Lensink, R., 2006. “Controversies over the impact of development aid: It works; It doesn’t; It can, but that depends,” Journal of International Development, Vol.18, pp.1031-1050

McGillivray, M., 2009. “Aid, economic reform, and public sector fiscal behaviour in developing countries,” Review of Development Economics, 13(3), pp.526-542

Morrissey, O., Iseli, O. and Manja, D., 2006. “Aid loans versus aid grants: Are the effects different?”, CREDIT Research Paper, University of Nottingham, No.06/07

Neanidis, C. and Varvarigos, D., 2009. “The allocation of volatile aid and economic growth: Theory and evidence,” European Journal of Political Economy, Vol.25, pp.447-62

Ouattara, B., 2006. “Foreign aid and Government fiscal behaviour in developing countries: Panel data evidence,” Economic Modelling,Vol.23, pp.506-514

Rajan, G. and Subramanian, A., 2005. “What undermines aid’s impact on growth?”, IMF working paper, WP/05/126

Round, I. and Odedokun, M., 2004. “Aid effort and its determinants,” International Review of Economic & Finance, Vol.13, pp.293-309
Keywords Aid, volatility, growth rate, South Asia, fungibility
DOI http://dx.doi.org/10.15208/beh.2010.23
Pages 1-9
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Share
Search in articles
Statistics
Journal Published articles
BEH 558
Journal Hits
BEH 1134754
Journal Downloads
BEH 41300
Total users online -