Aid-growth Nexus in Bangladesh: An Evidence from the ARDL Bound Testing Approach

Abstract

The debate on the aid-growth nexus isn’t a new one. This much heated issue has received a good deal of empirical coverage for the time series data of Bangladesh. In this study we have revitalized the old debate to minimize existing literature gaps on the aid-growth nexus in Bangladesh. We have employed ARDL bound testing approach to examine the nature of relationship between aid and economic growth in Bangladesh. In the long run per capita foreign aid positively influence per capita gross national income. It exerts the same effect in short run too. In long run a 1 percent increase in per capita aid leads to 0.27 percent increase in per capita gross national income and in short run 10 percent increase in aid per capita increases per capita gross national income by 0.54 percent. A positive effect from the policy variable has also been obtained which justifies the implementation of pro trade liberalization policy in the post liberation-war period.

Keywords: official development assistance, economic growth, cointegration, ARDL bound testing

DOI: 10.7176/JESD/10-6-17

Publication date:March 31^st 2019