Investigating Aid Effectiveness in Developing Countries: The Case of Nepal

Investigating Aid Effectiveness in Developing Countries: The Case of Nepal

Foreign aid serves as an important source of capital for any developing or under-developed country. It is very important to see how the recipient country can utilize this aid in the economic upliftment of the nation. Taking a case of Nepalese economy, this paper investigates the effectiveness of foreign aid in developing countries. The result from Johansen’s cointegration test reveals that foreign aid independently is not adequate for the economic growth. Increased capital and technological infrastructures, improved skills on human capital, on the other hand, significantly changes the result for the positive aid impact on growth in the long run. Therefore, we can conclude that a good policy…