UNDERSTANDING THE RELATIONSHIP AMONG AID, VOLATILITY AND GROWTH IN PAKISTAN: AN ARDL ANALYSIS

Abstract

Due to the lack of resources in developing nations, most of them depend on foreign aid to increase their saving for further investment to boost economic growth. This study analyzes the influence of foreign aid and its volatility on economic growth of Pakistan for the period of 1975 to 2015. The volatility of aid is measured by GARCH modelling and the ARDL technique is used for long-run estimation of results. Empirics depict that foreign aid  have positive bearing on economic growth while aid volatility is inversely related to economic growth. The study also suggests some policies related to foreign aid.