Aid effectiveness, political instability and economic growth in Bangladesh: An empirical re-investigation

Abstract

There is a continuously debate on whether foreign aid helps or deters the economic growth of a developing country. According to the traditional pro aid view, foreign aid increases the economic growth. On the other hand, the traditional anti aid view claims that foreign aid is detrimental to economic growth. Of late, some researchers have found a somewhat positive correlation between the foreign aid and economic growth in Bangladesh. However, their findings have not convinced everybody concerned. As Bangladesh is a developing country, whether foreign aid has a positive or negative impact on the growth, has to be analyzed convincingly. The present study aims at estimating the effects of foreign aid on Bangladesh economy by reviewing a set of time series data of Bangladesh economy Macroeconomic data from The World Bank Data Bank, The International Financial Statistics (IFS), The Finance Division of the Bangladesh Government Ministry of Finance and The Bangladesh Bank Statistics Department were used in the statistical tests. The Ordinary Least Square (OLS) and the Prais -Winsten AR (1)-regression techniques have been applied to estimate the specified model.