6533b861fe1ef96bd12c56ff

RESEARCH PRODUCT

Investigating Aid Effectiveness in Developing Countries: The Case of Nepal

Yashoda KarkiIlias O. Pappas

subject

Commercial policyMacroeconomicsCointegration05 social sciencesBalance of tradeDeveloping country02 engineering and technologyHuman capitalAid effectivenessError correction model020204 information systemsCapital (economics)0502 economics and business0202 electrical engineering electronic engineering information engineeringEconomics050207 economics

description

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 environment helps increase the aid effectiveness. However, the prevailing trade policy in the country is negatively affecting the aid effectiveness due to the extremely increased trade deficit. In the short-run, there is a negative impact of aid on growth.

yearjournalcountryeditionlanguage
2020-01-01
https://doi.org/10.1007/978-3-030-45002-1_29