Foreign aid, external debt and governance

Author Affiliation

Adnan Haider is Assistant Professor at Institute of Business Administration (IBA), Karachi

Faculty / School

Faculty of Business Administration (FBA)

Department

Department of Economics

Was this content written or created while at IBA?

Yes

Document Type

Article

Source Publication

Economic Modelling

ISSN

0264-9993

Disciplines

Econometrics | Economics | Finance

Abstract

This paper investigates the impact of foreign aid, external debt and governance on the economic growth by extending the Ramsey-Cass-Koopman's growth model in an open economy framework. Steady-state and short run analysis shows that external debt and foreign aid do not affect the growth rate of consumption but have level impact on consumption. Foreign aid and governance encourage the economic growth but external debt creates a burden on the economy. Both investment and saving are independent of external debt and thus the current account surplus. Foreign aid does not affect investment directly but it has a direct positive impact on the savings in the economy. Therefore, it is argued that improvements in the quality of governance will stimulate the output and consumption rapidly and it acts like a catalyst.

Indexing Information

HJRS - W Category, Scopus, Web of Science - Social Sciences Citation Index (SSCI)

Journal Quality Ranking

Impact Factor: 3.127

Publication Status

Published

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