The Macroeconomic Impact of Foreign Aid in Bangladesh Before and After the Paris Declaration

Bangladesh Development Research Working Paper Series (BDRWPS) BDRWPS 32 (November 2016)

32 Pages Posted: 14 Nov 2016

Date Written: November 13, 2016

Abstract

Foreign aid effectiveness has been a hot topic for several decades. Bangladesh has been receiving foreign assistance since its independence in 1971 and has taken various initiatives in enhancing the effectiveness of aid. The signing of the Paris Declaration is one such initiative where the government has committed to improve aid delivery and management so as to ensure the proper utilization of aid in its development programs. This paper examines the impact of foreign aid on Bangladesh’s economic growth before and after the signing of the Paris Declaration in 2005. The result of the analysis is such that there is almost no change in the aid-growth relationship before and after adopting the Paris Declaration principles. Moreover, even though aid-dependency and Dutch Disease effects were always minimal in Bangladesh, the inflow of external assistance was to some extent volatile in the pre-declaration phase. However, the fluctuation of aid has not progressed further in the post-declaration phases. Hence, the overall macroeconomic impact of foreign aid remains the same, concluding that the Paris declaration has not yet played a constructive role in enhancing the aid-growth relationship within the economy.

Keywords: aid, aid effectiveness, macroeconomics, Dutch Disease, Bangladesh

JEL Classification: O11, O19, O41

Suggested Citation

Dristy, Nuzat, The Macroeconomic Impact of Foreign Aid in Bangladesh Before and After the Paris Declaration (November 13, 2016). Bangladesh Development Research Working Paper Series (BDRWPS) BDRWPS 32 (November 2016). Available at SSRN: https://ssrn.com/abstract=2869139 or http://dx.doi.org/10.2139/ssrn.2869139

Nuzat Dristy (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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