Nexus between foreign direct investment, foreign aid, foreign remittance and economic growth in Bangladesh: Analysis of association

Abstract

This study aims at exploring time series data of economic growth indicator and foreign inflow of fund to Bangladesh to investigate the nature of impact of such fund inflows on economic growth. In this regard data has been collected from World Bank data base for a period ranging from 1976 to 2017. The analysis is conducted by using the ARDL approach. The study identified foreign direct investment as a crucial external factor for growth of Bangladeshi economy. But another two mentionable ways of fund inflow such as foreign aid and remittance are found to play negative role in this regard. Along with these findings, this study recommends that the competent authority of Bangladesh should focus on creating more investment friendly environment to attract and ensure continual of foreign investment. Additionally, the study also claims for proper action to ensure effective use of policy and rules to make the best use of foreign aid and ensure enhanced capital formation of the foreign remittance.
 IIUC Studies Vol.16, December 2019: 77-98

The Relationship Between Foreign Aid and Economic Growth: Empirical Evidence from Somalia

“…According to Rosenstein-Rodan [17], the well-known bigpush principle, an underdeveloped economy to address growth hurdles, a minimum amount of high investment is required. In this case, foreign aid the following studies [13,18,19] concluded that foreign aid enhances a direct investment in non-industrialized nations by indirectly raising capital through increased domestic income and savings. Additionally, assistance in the form of technical assistants improves technical knowledge and human talent, thereby contributing to the economies of developing countries.…”

“…Therefore, that could cause the foreign to have negative impact on economic growth. Similarly a study conducted in Bangladesh by Zobair and Uddin [18] examined historical data on economic growth indicators and foreign investment in Bangladesh to learn more about the effects of these inflows. In this regard, data from the World Bank's database have been gathered for the years 1976 to 2017.…”

“…In modeling foreign aid on the gross domestic product, authors adhered to the model stipulation of [1,4,15,18] who incorporated other control variables like inflation, labor, and capital in their model formulation and described the relationship between economic growth and exchange rate. Consequently, our model is constructed as follows:…”