Does foreign aid act as an instrument of economic growth in India and Sri Lanka?

Foreign aid is considered as an important instrument of the foreign policy of states. It acts as a major source of foreign exchange earnings for developing countries. Therefore, it is regarded as a basic pillar of developmental process. We examine the trends and composition of foreign aid inflows in...

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Main Authors:	Sethi, Narayan, Bhujabal, Padmaja, Sahoo, Malayaranjan, Sucharita, Sanhita
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2019
Online Access:	http://journalarticle.ukm.my/14114/ http://journalarticle.ukm.my/14114/ http://journalarticle.ukm.my/14114/1/jeko_53%282%29-1.pdf

id	ukm-14114
recordtype	eprints
spelling	ukm-141142020-02-06T13:33:38Z http://journalarticle.ukm.my/14114/ Does foreign aid act as an instrument of economic growth in India and Sri Lanka? Sethi, Narayan Bhujabal, Padmaja Sahoo, Malayaranjan Sucharita, Sanhita Foreign aid is considered as an important instrument of the foreign policy of states. It acts as a major source of foreign exchange earnings for developing countries. Therefore, it is regarded as a basic pillar of developmental process. We examine the trends and composition of foreign aid inflows in India and Sri Lanka. This study also empirically examines the relationship between foreign aid or Overseas Development Assistance (ODA) and economic growth for India and Sri Lanka using the annual data 1960-1961 to 2014-2015. Further, this study aims to test the causal relationship among foreign aid with other macroeconomic variables such as domestic investment, financial sector development and trade, and inflation rate of these countries. We have employed Johansen and Juselius (JJ) (Johansen and Juselius, 1990) procedure of testing for the presence of multiple cointegrating vectors. We have also used Vector Error Correction (VECM)-Granger Causality test to find out the short run dynamic equilibrium relationship among the variables. The empirical results show that there are both short and long run equilibrium relationships existing between foreign aid and economic growth with other macroeconomic variables in both the countries. However, the direction of inter-linkage between foreign aid and economic growth contradicts to each other in case of India and Sri Lanka, both in short run and long run. We have found that the error correction term is positive and significant in selected macroeconomic variables indicating a long-run causality in India and Sri Lanka. Penerbit Universiti Kebangsaan Malaysia 2019 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/14114/1/jeko_53%282%29-1.pdf Sethi, Narayan and Bhujabal, Padmaja and Sahoo, Malayaranjan and Sucharita, Sanhita (2019) Does foreign aid act as an instrument of economic growth in India and Sri Lanka? Jurnal Ekonomi Malaysia, 53 (2). pp. 1-19. ISSN 0127-1962 http://www.ukm.my/fep/jem/content/2019-2.html
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	Foreign aid is considered as an important instrument of the foreign policy of states. It acts as a major source of foreign exchange earnings for developing countries. Therefore, it is regarded as a basic pillar of developmental process. We examine the trends and composition of foreign aid inflows in India and Sri Lanka. This study also empirically examines the relationship between foreign aid or Overseas Development Assistance (ODA) and economic growth for India and Sri Lanka using the annual data 1960-1961 to 2014-2015. Further, this study aims to test the causal relationship among foreign aid with other macroeconomic variables such as domestic investment, financial sector development and trade, and inflation rate of these countries. We have employed Johansen and Juselius (JJ) (Johansen and Juselius, 1990) procedure of testing for the presence of multiple cointegrating vectors. We have also used Vector Error Correction (VECM)-Granger Causality test to find out the short run dynamic equilibrium relationship among the variables. The empirical results show that there are both short and long run equilibrium relationships existing between foreign aid and economic growth with other macroeconomic variables in both the countries. However, the direction of inter-linkage between foreign aid and economic growth contradicts to each other in case of India and Sri Lanka, both in short run and long run. We have found that the error correction term is positive and significant in selected macroeconomic variables indicating a long-run causality in India and Sri Lanka.
format	Article
author	Sethi, Narayan Bhujabal, Padmaja Sahoo, Malayaranjan Sucharita, Sanhita
spellingShingle	Sethi, Narayan Bhujabal, Padmaja Sahoo, Malayaranjan Sucharita, Sanhita Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
author_facet	Sethi, Narayan Bhujabal, Padmaja Sahoo, Malayaranjan Sucharita, Sanhita
author_sort	Sethi, Narayan
title	Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
title_short	Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
title_full	Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
title_fullStr	Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
title_full_unstemmed	Does foreign aid act as an instrument of economic growth in India and Sri Lanka?
title_sort	does foreign aid act as an instrument of economic growth in india and sri lanka?
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2019
url	http://journalarticle.ukm.my/14114/ http://journalarticle.ukm.my/14114/ http://journalarticle.ukm.my/14114/1/jeko_53%282%29-1.pdf
first_indexed	2023-09-18T20:06:22Z
last_indexed	2023-09-18T20:06:22Z
_version_	1777407185611915264

Does foreign aid act as an instrument of economic growth in India and Sri Lanka?

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