AID AND GROWTH IN BANGLADESH: A REASSESSMENT

Authors

  • Sharif Hossain University of Dhaka
  • Rajarshi Mitra International University, 1-13-1 Matoba-kita, Kawagoe
  • Thasinul Abedin University of Chittagong.

DOI:

https://doi.org/10.35774/jee2018.04.422

Keywords:

Cointegration, economic growth, foreign aid, granger causality.

Abstract

Although the amount of foreign aid received by Bangladesh as a share of GDP has declined over the years, Bangladesh remains one of the heavily aiddependent countries in Asia. The results of most empirical studies that have examined the effectiveness of foreign aid or other forms of development assistance for economic growth have varied considerably depending on the econometric methodology used and the period of study. As the debate and controversy over aid-effectiveness for economic growth continue to grow, this paper reinvestigates the short-run and long-run effects of foreign aid received on percapita real income of Bangladesh over the period 1972–2015. A vector error correction model is estimated. The results indicate lack of any significant short-run and long-run relation between foreign aid and per-capita real income. Results further indicate short-run unidirectional causalities from per-capita real GDP to domestic investment (in proportion to GDP), from government expenditure (in proportion to GDP) to inflation rate, from inflation rate to domestic investment (in proportion to GDP), and from domestic investment to foreign aid (as percentages of GDP). Short-run bidirectional causality is observed between per-capita electricity consumption and per-capita real GDP, and between per-capita real GDP and government expenditure (in proportion to GDP).

JEL: F35, F43, O53.

Author Biographies

Sharif Hossain, University of Dhaka

Md., Professor, Department of Accounting and Information Systems, Faculty of Business Studies, University of Dhaka

Rajarshi Mitra, International University, 1-13-1 Matoba-kita, Kawagoe

Corresponding Author, Associate Professor, Institute for International Strategy, Tokyo
International University, 1-13-1 Matoba-kita, Kawagoe, Saitama 350-1197, Japan.

Thasinul Abedin, University of Chittagong.

Md. Lecturer, Department of Accounting, Faculty of Business Administration, University of Chittagong.

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Published

09.04.2019

How to Cite

Hossain, Sharif, et al. “AID AND GROWTH IN BANGLADESH: A REASSESSMENT”. Journal of European Economy, vol. 17, no. 4, Apr. 2019, pp. 422-40, doi:10.35774/jee2018.04.422.

Issue

Section

INTERNATIONAL ECONOMICS