The effect of foreign aid on economic growth in developing countries

Abstract

This paper analyzes the effects of foreign aid on the economic growth of developing countries. The study uses annual data on a group of 85 developing countries covering Asia, Africa, and Latin America and the Caribbean for the period 1980-2007. The hypothesis that foreign aid can promote growth in developing countries was explored. This hypothesis was tested using panel data series for foreign aid, while accounting for regional differences in Asian, African, Latin American, and the Caribbean countries as well as the differences in income levels. While the findings of previous studies are generally mixed, the results of this study also indicate that foreign aid has mixed effects on economic growth in developing countries.