Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence

Christina Pradhan; Ram Kumar Phuyal

doi:doi:10.11648/j.ijfbr.20200603.12

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Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence

Christina Pradhan, Ram Kumar Phuyal

Published in International Journal of Finance and Banking Research (Volume 6, Issue 3)

Received: 24 February 2020 Accepted: 20 April 2020 Published: 28 May 2020

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Abstract

This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.

Published in	International Journal of Finance and Banking Research (Volume 6, Issue 3)
DOI	10.11648/j.ijfbr.20200603.12
Page(s)	44-50
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Foreign Aid, Remittance, Investment, Partial Adjustment Model

References

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APA Style

Christina Pradhan, Ram Kumar Phuyal. (2020). Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. International Journal of Finance and Banking Research, 6(3), 44-50. https://doi.org/10.11648/j.ijfbr.20200603.12

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ACS Style

Christina Pradhan; Ram Kumar Phuyal. Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. Int. J. Finance Bank. Res. 2020, 6(3), 44-50. doi: 10.11648/j.ijfbr.20200603.12

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AMA Style

Christina Pradhan, Ram Kumar Phuyal. Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. Int J Finance Bank Res. 2020;6(3):44-50. doi: 10.11648/j.ijfbr.20200603.12

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@article{10.11648/j.ijfbr.20200603.12,
  author = {Christina Pradhan and Ram Kumar Phuyal},
  title = {Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence},
  journal = {International Journal of Finance and Banking Research},
  volume = {6},
  number = {3},
  pages = {44-50},
  doi = {10.11648/j.ijfbr.20200603.12},
  url = {https://doi.org/10.11648/j.ijfbr.20200603.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20200603.12},
  abstract = {This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.},
 year = {2020}
}

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TY  - JOUR
T1  - Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence
AU  - Christina Pradhan
AU  - Ram Kumar Phuyal
Y1  - 2020/05/28
PY  - 2020
N1  - https://doi.org/10.11648/j.ijfbr.20200603.12
DO  - 10.11648/j.ijfbr.20200603.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 44
EP  - 50
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20200603.12
AB  - This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.
VL  - 6
IS  - 3
ER  -

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Author Information

Christina Pradhan

Ace Institute of Management (AIM), Pokhara University, Pokhara, Nepal
Ram Kumar Phuyal

Centre for Economic Development and Administration (CEDA), Tribhuvan University, Kirtipur, Nepal; National Planning Commission (NPC), Government of Nepal, Kathmandu, Nepal

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APA Style

Christina Pradhan, Ram Kumar Phuyal. (2020). Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. International Journal of Finance and Banking Research, 6(3), 44-50. https://doi.org/10.11648/j.ijfbr.20200603.12

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ACS Style

Christina Pradhan; Ram Kumar Phuyal. Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. Int. J. Finance Bank. Res. 2020, 6(3), 44-50. doi: 10.11648/j.ijfbr.20200603.12

Copy | Download

AMA Style

Christina Pradhan, Ram Kumar Phuyal. Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence. Int J Finance Bank Res. 2020;6(3):44-50. doi: 10.11648/j.ijfbr.20200603.12

Copy | Download

@article{10.11648/j.ijfbr.20200603.12,
  author = {Christina Pradhan and Ram Kumar Phuyal},
  title = {Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence},
  journal = {International Journal of Finance and Banking Research},
  volume = {6},
  number = {3},
  pages = {44-50},
  doi = {10.11648/j.ijfbr.20200603.12},
  url = {https://doi.org/10.11648/j.ijfbr.20200603.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20200603.12},
  abstract = {This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence
AU  - Christina Pradhan
AU  - Ram Kumar Phuyal
Y1  - 2020/05/28
PY  - 2020
N1  - https://doi.org/10.11648/j.ijfbr.20200603.12
DO  - 10.11648/j.ijfbr.20200603.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 44
EP  - 50
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20200603.12
AB  - This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.
VL  - 6
IS  - 3
ER  -

Copy | Download