DefinePK

Abstract

This study used panel data approach to investigate comprehensive set of determinant of foreign aid and extent to which these determinants, domestic saving, capital formation, human capital, government expenditure, military expenditure and trade deficit, can affect foreign aid dependence in south Asian countries like Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, and SriLanka. This study used Error correction model to estimate the short run association between defined variables. The results indicate that capital formation, ,trade deficit, government budget deficit and military expenditure have positive and significant association with foreign aid in the long run while these determinant have positive but insignificant relationship with foreign aid in the short run except gross domestic capital formation (GDCF). However, domestic savings, human capital formation has negative and significant relationship with foreign aid in long run. The findings of the study help foreign aid policy makers, analysts, researchers and official donor agencies