The Nexus between Foreign Aid and Economic Growth of Pakistan
A Cointegration Analysis
DOI:
https://doi.org/10.58329/criss.v3i2.131Abstract
Abstract Views: 759
There is extensive literature available that dissects the linkage between foreign aid and the growth of the economy. The key focus of the current study is to explore how aid received from foreign countries are linked with growth rate of Pakistan’s economy. The present study considers time series data from 1985 to 2019 and corelates the nexus of foreign aid and Pakistan’s GDP growth rate in the long as well as short run. The study examined one dependent variable which is GDP, and seven independent variables including official development assistance as foreign aid, population growth, inflation, trade, domestic saving, unemployment, and foreign direct investment by using ARDL method. Broad canvas of the foreign aid and growth rate nexus is the main limitation of the paper and other factors impacting economic growth could not be taken into consideration due to the non- availability of complete data. The results of the study conclude that foreign aid hurts the economic growth of Pakistan throughout the thirty-four years not only in the short run but in long run as well.
Keywords:
Cointegration analysis, Economic growth, Foreign aid, Pakistan
References
Adebayo, T. S., & Beton Kalmaz, D. (2020). The ongoing debate between foreign aid and economic growth in Nigeria: a wavelet analysis. Social Science Quarterly, 101(5), 2032-2051
Albiman, M. M. (2016). What are the impact of foreign aid to the economic growth? Time series analysis with new evidence from Tanzania. Business and Economics Journal, 7(3), 1-7.
Awan, A. G. (2012). Diverging trends of human capital in BRIC countries. International Journal of Asian Social Science, 2(12), 2195-2219.
Awan, A. G., & Moeen-ud-Din, M. (2015). The Impact of Foreign Aid On
Ayesha Afzal, Nawazish Mirza & Fatima Arshad (2021) Pakistan’s poverty puzzle: role of foreign aid, democracy & media, Economic Research-Ekonomska Istraživanja, 34:1, 368-382, DOI: 10.1080/1331677X.2020.1788964
Balcioglu, H. (2016). Foreign aid and economic growth: a panel cointegration for selected turkic republics. International Journal of Business and Social Research, 6(6), 17-23.
Bitew, T. (2014). Foreign Aid and Economic Growth in Ethiopia: A Cointegration Analysis. Research by University of Addis Ababa University Ethiopia.
Chatterjee, S., & Turnovsky, S. J. (2007). Foreign aid and economic growth: The role of flexible labor supply. Journal of Development Economics, 84(1), 507-533.
Chenery, H. B. (1967). Foreign assistance and economic development. In Capital movements and economic development (pp. 268-292). Palgrave Macmillan, London.
Durbarry, R., Gemmell, N., & Greenaway, D. (1998). New evidence on the impact of foreign aid on economic growth (No. 98/8). CREDIT Research paper.
Easterly, W. (2001). The political economy of growth without development: A case study of Pakistan. Paper for the Analytical Narratives of Growth Project, Kennedy School of Government, Harvard University, 1-53.
Ekanayake, E. M., & Chatrna, D. (2010). The effect of foreign aid on economic growth in developing countries. Journal of International Business and cultural studies,
Ellahi, N., & Ahmad, M. (2011, March). Testing the joint impact of foreign aid and foreign direct investment on overtime economic growth of Pakistan. In International Conference on Business and Economic Research. Langkawi Malaysia: World Research Agency.
Fasanya, I. O., & Onakoya, A. B. (2012). Does foreign aid accelerate economic growth? An empirical analysis for Nigeria. International journal of economics and financial issues, 2(4), 423-431.
Fatima, F. (2014). Foreign aid and economic growth. Available at SSRN 2407348.
Feeny, S. (2005). The impact of foreign aid on economic growth in Papua New Guinea. Journal of Development Studies, 41(6), 1092-1117.
Hansen, H., & Tarp, F. (2000). Aid effectiveness was disputed. Journal of International Development, 12(3), 375-398.
Hossain, B. (2014). The effect of foreign aid on the economic growth of Bangladesh. Journal of Economics and Development Studies, 2(2), 93-105.
Hussain, A., Tariq, M., Qadir, F., & Saeed, I. U. (2018). Foreign Aid and Economic Growth Nexus: A comparative study of Pakistan with four SAARC countries. Journal of the Research Society of Pakistan, 55(1).
Islam, A. (1992). Foreign aid and economic growth: an econometric study of Bangladesh. Applied Economics, 24(5), 541-544.
Javaid, W. (2016). Impact of foreign direct investment on economic growth of Pakistan-An ARDL-ECM approach.
Javid, M., & Qayyum, A. (2011). Foreign aid and growth nexus in Pakistan: The role of macroeconomic policies. Working Papers & Research Reports, 2011.
Khan, M. A., & Ahmed, A. (2007). Foreign aid—blessing or curse: Evidence from Pakistan. The Pakistan Development Review, 215-240.
Khan, N. Z., Rahim, E., & Mahmood, Z. (1993). Foreign Aid, Domestic Savings and Economic Growth (Pakistan: 1960 to 1988)[with Comments]. The Pakistan Development Review, 32(4), 1157-1167.
Levy, V. (1984). The savings gap and the productivity of foreign aid to a developing economy: Egypt. The Journal of Developing Areas, 19(1), 21-34.
Liaquat, H., Gul, N., Irfan, A., & Sami, A. (2016). Pakistan’s exports efficiency: An application of the stochastic frontier gravity model. Abasyn Journal of Social Sciences–Special Issue, 164-177.
Lorentzen, P., mcmillan, J., & Wacziarg, R. (2008). Death and development. Journal of economic growth, 13(2), 81-124. Https://www.pide.org.pk/pdf/brief/Foreign-Aid-to- Pakistan-Webinar-Brief-10.pdf
Mohey-ud-din, G. (2005). Impact of Foreign Aid on Economic Development in Pakistan [1960-2002].
Moreira, S. B. (2005). Evaluating the impact of foreign aid on economic growth: A cross- country study. Journal of Economic Development, 30(2), 25-48.
Morrissey, O. (2001). Does aid increase growth? Progress in development studies, 1(1), 37- 50.
Mullick, H. (2004). US foreign aid and economic growth: A post-9/11 case study of Pakistan as a key ally in the war against terrorism. In Proceedings to the Pennsylvania Economic Association Conference Summer.
Mustafa, M. E., Elshakh, M. M., & Ebaidalla, E. M. (2019). Does Foreign Aid Promote Economic Growth in Sudan? Evidence from ARDL Bounds Testing Analysis. Journal of Economic Cooperation & Development, 40(3).
Pakistan's Economy. Science International, 27(4). Pak Us Embassy 2019, https://pk.usembassy.gov/our-relationship/policy-history/us- assistance-to-pakistan/
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Pohwani, P., Khoso, J. R., & Ahmed, W. (2019). Impact of foreign aid on the economic growth of Pakistan. Journal of Public Value and Administrative Insight, 2(1), 18- 25.
Qayyum, U., & Haider, A. (2012). Foreign aid, external debt and economic growth nexus in low-income countries: the role of institutional quality. The Pakistan Development Review, 97-115.
Rahnama, M., Fawaz, F., & Gittings, K. (2017). The effects of foreign aid on economic growth in developing countries. The Journal of Developing Areas, 51(3), 153-171.
Randhawa, G. K. (2012). Foreign aid in economic development. International Journal of Computing & Business Research, 3(6).
Sarwar, A., Hassan, M., & Mahmood, T. (2015). Foreign aid and governance in Pakistan. Pakistan Economic and Social Review, 149-176.
Shahzad, A., Ahmed, T., Khiliji, B. A., & Ahmed, I. (2011). Impact of foreign aid on public expenditure in Pakistan. Researchers World, 2(3), 98.
Shaikh, S. (2011). Foreign Aid and Economic Growth: Case for Pakistan (1972-2008).
Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94.
Sothan, S. (2018). Foreign aid and economic growth: evidence from Cambodia. The Journal of International Trade & Economic Development, 27(2), 168-183.
Sultana, S. (2019). Does Foreign Aid Affect Economic Growth In Pakistan? A Disaggregate Analysis. Review of Socio-Economic Perspectives, 4(2), 81-102.
Tanveer, A., Latif, M. M., & Ziafat, M. (2019). Role of Foreign Aid in Employment Generation; A Case Study of Pakistan. ASD Journal of Economics, 1(2), 103-112.
Weerasingha, W. R. D., & Mustafa, A. M. M. (2019). Foreign aid and economic growth in South Asia
Abbsas, S., Malik, A., & Rafique, M. (2022). Budding Marriage. Life Satisfaction and Quality of Life among, 7, 113-119.
Ahmed, J., Rafique, M., Qureshi, A., Shamsuddin, P., & Abd Wahab, D. (2024). Bridging the Gap: Exploring the Role of Green Transformational Leadership in Fostering Sustainability in the Islamic Banking Industry. IBA SBS 5th International Conference 2026. Retrieved from https://ir.iba.edu.pk/sbsic/2024/program/51
Al Asbahi, A. A. M. H., Fang, Z., Chandio, Z. A., Tunio, M. K., Ahmed, J., & Abbas, M. (2020). Assessing barriers and solutions for Yemen energy crisis to adopt green and sustainable practices: A fuzzy multi-criteria analysis. Environmental Science and Pollution Research, 27(29), 36765-36781.
Alsalmi, N., Ullah, S., & Rafique, M. (2023). Accounting for digital currencies. Research in International Business and Finance, 64, 101897.
Bhatti, M. Q., Abbas, F., & Rafique, M. (2023). Narratives Stereotypical Roles and their Counter-Narrative: A Feminist Analysis of the Verdict by Osman Haneef. Global Sociological Review, VIII(II), 118-128.https://doi.org/10.31703/gsr.2023(VIII-II).13
Dakhan, S. A., Sohu, J. M., Jabeen, A., Mirani, M. A., Shaikh, J. A., & Iqbal, S. (2020). Impact of green HRM on employees pro-environmental behavior: mediating role of women environmental knowledge at higher education institutions. IJCSNS International Journal of Computer Science and Network Security, 20(12), 202-208.
Ghani, H., Khan, C., Miraj, J., & Shaikh, J. A. (2023). GREEN MARKETING AND ITS IMPACT ON CONUSMER PURCHASING BEHAVIOR OF BALOCHISTAN. THE ASIAN BULLETIN OF GREEN MANAGEMENT AND CIRCULAR ECONOMY, 3(1), 122-142.
Hureri, M. A., Rafique, M. O., & Yousufi, A. R. (2021). URDU-5 The Development of Spouse in The Light of Holy Prophet Muhammad (PBUH)’S Relation with Sayyedah Aisha (RA). Al-Aijaz Research Journal of Islamic Studies & Humanities, 5(2), 53-73.
Hureri, M. A., Rafique, M. O., Alia, K., Ullah, M. Z., Ahmad, M., & Majid, A. (2022). Holistic Islamic Model for Securing Wealth in Light of Maqasid-E-Shariah. Al-Qanṭara, 8(2).
Hussain, A., Ahmad, J., Altaf, Y., Khan, M., & Sanghi, A. (2016). A study on various attributing reasons for switching telecommunication brands among various cellular services at Larkana, Sindh, Pakistan. Finance and Management Sciences, 11(1), 36-83.
Jamali, K. A., Katper, N., Khaskhelly, F. Z., & Khaskhelly, Y. (2024). University Incubators: Cultivating Innovation for a Flourishing Entrepreneurial Society. International Research Journal of Management and Social Sciences, 5(3), 151-165.
Johl, S. K., Umrani, A. I., & Munodawafa, R. T. (2017, November). A comparative study of active learning with and without using mind mapping approach. In 2017 7th World Engineering Education Forum (WEEF) (pp. 839-843). IEEE. https://doi.org/10.1109/WEEF.2017.8467158
Kakepoto, I., Bhutto, N. A., & Umrani, A. I. (2022). Biometric attendance management system: A university perspective. Global Social Sciences Review, VII, 309-318. http://dx.doi.org/10.31703/gssr.2022(VII-II).31
Katper, N. K., Chaudhry, N. I., Tunio, M. N., & Ali, M. A. (2020). Impact of leadership style and organizational culture on organizational commitment. Sukkur IBA Journal of Management and Business, 7(1), 92-106.
Katper, N. K., Madun, A., & Katper, S. A. (2021). Sector-wise analysis for capital structures and managerial behavior in Shariah-compliant and conventional firms of Pakistan. International Research Journal of Management and Social Sciences, 2(2), 192-206.
Khan, A., Ahmed, J., & Khan, F. U. (2019). An Empirical Study of Customer Satisfaction and Loyalty: An Evidence of Telecom Sector in Pakistan. Journal of Business & Tourism, 5(2), 65-78.
Khan, A., Ishfaque Ahmed, M. H., & Ahmed, J. IMPACT OF SOCIAL MEDIA MARKETING ON BRAND BUILDING: A CASE STUDY OF OLX, PAKISTAN.
Patil, P., Chandane, R., Desai, P., & Sheikh, J. A DESIGN OF PIEZOELECTRIC BASED MOBILE CHARGER USING SOUND ENERGY.
Rafique, M. O. (2023). Women's Entrepreneurship in Halal Tourism: A Game Changer for Developing Economies. In Women’s Empowerment Within the Tourism Industry (pp. 402-412). IGI Global Scientific Publishing.
Rafique, M. O. (2023). Women's Entrepreneurship in Halal Tourism: A Game Changer for Developing Economies. In Women’s Empowerment Within the Tourism Industry (pp. 402-412). IGI Global Scientific Publishing.
Rafique, M. O., Abdullah, A. S. C., & Balwi, M. A. W. F. M. (2021). An Outlook of Ḥiyal (Legal Stratagems) and Its Compilations in Islamic Economic Literature. Online Journal of Research in Islamic Studies, 8(3), 37-49.
Rafique, M. O., Abdullah, A. S. C., & Fatoni, M. A. W. (2021). Analysis of legal stratagems cases in the Quran and Sunnah. Al-Turath Journal of al-Quran and al-Sunnah, 6(2), 89-97.
Rafique, M. O., Abdullah, A. S. C., & Fatoni, M. A. W. (2023). Analysis of Ḥiyal (Legal Stratagems) Cases in Islamic Financial Law. Russian Law Journal, 11(2), 299-308.
Rafique, M. O., Abdullah, A. S. C., & Fatoni, M. A. W. (2023). Analysis of Ḥiyal (Legal Stratagems) Cases in Islamic Financial Law. Russian Law Journal, 11(2), 299-308.
Rafique, M. O., Abdullah, A. S. C., Fatoni, M. A. W., & Lubis, A. (2023). Hiyal (Legal Stratagems) in Islamic Finance: Systematic Literature Review. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(6), 9.
Rafique, M. O., Abdullah, A. S. C., Fatoni, M. A. W., & Lubis, A. (2023). Hiyal (Legal Stratagems) in Islamic Finance: Systematic Literature Review. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(6), 9.
Rafique, M. O., Hureri, M. A., & Iqbal, H. A. (2023). Form Over Substance Approach In Islamic Finance Due To Darurah Concept. Pakistan Journal of Qur’ānic Studies, 2(2), 158-171.
Rafique, M. O., Qureshi, M. A., Muhaimin, A., & Shah, M. H. (2024). Irrigating Arid Lands: Sustainable Development Through Blue Sukuk. In Climate Change and Finance: Navigating the Challenges and Opportunities in Capital Markets (pp. 323-341). Cham: Springer Nature Switzerland.
Rafique, M. O., Saeed, A., Anis, M., Mahboob, F., & Ghaffar, A. (2022). Analysis of Makaharij (relaxations) in AAOIFI Sharīʿah Standards for Islamic Banks.
Rafique, M. O., Saeed, A., Anis, M., Mahboob, F., Ghaffar, A., & Jalbani, A. A. (2022). Isomorphic pressures on Shari’ah board members in Islamic banks (to apply the legal stratagems in IF products). Journal of Xidian University, 16(5), 489-502.
Rafique, M. O., Uddin, I., Abdullah, A. S. C., & Fatoni, M. A. W. (2021). Mitigating Shari'ah Risk through Hiyal (Legal Stratagems): A Classical and Effective Technique. COMSATS Journal of Islamic Finance (CJIF), 6(2), 41.
Rafique, M., & Siddiqui, F. (2024). Building Ethical Financial Pathways: Mabrook and the Future of Shariah-Compliant Crowdfunding. IBA CEIF World Islamic Finance Forum (WIFF). Retrieved from https://ir.iba.edu.pk/wiff/2024/agenda/6
Shah, E., Ali, S., & Katper, N. (2023). An overview of women empowerment policy with a social justice lens and frugal innovation. Frugal innovation and social transitions in the digital era, 123-132.
Shaikh, S., Tharkar, P., Thakur, P., & Sheikh, J. (2016). Human Fall Detection and Monitoring System. International Journal of Advanced Research in Computer Engineering & Technology (IJARCET), 5(5).
Tunio, M. N., Abdullah, M., Katper, N. K., & Chaudhry, N. I. (2020). An Impact of Workaholics on Creativity: the mediating role of Negative Mood and moderating role of Supervisor Support. Sukkur IBA Journal of Management and Business, 7(2), 73-92.
Tunio, M. N., Shaikh, E., Katper, N. K., & Brahmi, M. (2023). Nascent entrepreneurs and challenges in the digital market in developing countries. International Journal of Public Sector Performance Management, 12(1-2), 140-153.
Uddin, I., Sabri, R., Bhatti, M. I., Rafique, M. O., & AsadUllah, M. (2022). Islamic capital markets: The structure, formation and management of sukuk. Routledge.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 CARC Research in Social Sciences
This work is licensed under a Creative Commons Attribution 4.0 International License.
