DEPARTMENT OF ECONOMICS Assignment: Literature Review Topic: Foreign Aid and Economic Growth
SUBMITTED TO: DR. SHAHZAD SUBMITTED BY: Muhammad Rashid Javed CLASS: M.PHIL ECONOMICS (2ND SEMESTER) ROLL NO. 8507
Review of Literature:
Chishti and Hassan (1992) empirically investigated the impact of Foreign AID on public investment in Pakistan over the period 1971-88. Iterative three stages least square (ITSLS) technique applied in this study. Results indicate that foreign aid in the form of grant has modest impact on public investment, and aid in the form of loan does not have significant impact on public investment.
Khan and Rahim (1993) investigated the interaction between foreign aid, domestic saving and economic growth. They used time series data for the period 1960 to 1988 and applied Ordinary Least Square (OLS) Technique. Result suggested that, there is negative relationship between foreign aid and domestic saving and positive relation with economic growth.
Khan (1997) conducted a study to examine that whether our debt situation is sustainable when we receive aid, and impact of foreign aid on economic growth of Pakistan. In this study he discussed the different time period from 1973. Study found that our debt situation is sustainable during aid follow. Granger test shows that aid has negative impact on GDP. Study suggested that Pakistan should rely on their internal resources.
Burnside and Dollar (2000) investigated the interaction between foreign aid, economic policies and growth. Time series data is taken from 56 different countries. OLS and 2SLS technique applied in this study. Result shows that aid has a positive impact on growth in