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The Impact of Foreign Aid on Economic Growth: Project and Program Aid in Indonesia

Agus Riyanto Kurniawan-2014-11-11-Queensland's institutional digital repository (The University of Queensland)
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TL;DRAbstract

Foreign aid of various types has been widely used as external financing in most developing countries. However there is no consensus whether aid promotes or hampers economic growth. Indonesia has utilized foreign aid for a long time, where program and project aid have become the most dominant aid types. However, no research has been conducted in Indonesia to estimate the relative effectiveness of these two types of aid on economic growth. This study is intended to analyse the effectiveness of project and program aid on economic growth in Indonesia over the period from 1970 to 2013. Characteristics of program and project aid in Indonesia are identified. The literature review explores cross-country and country-specific studies. The study used the Ordinary Least Squares (OLS) method to estimate the regression model. Stationarity tests and Johansen Cointegration test were also applied to address the data stationarity issues. All the classical assumption tests such as normality, multicolline

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Foreign aid of various types has been widely used as external financing in most developing countries. However there is no consensus whether aid promotes or hampers economic growth. Indonesia has utilized foreign aid for a long time, where program and project aid have become the most dominant aid types. However, no research has been conducted in Indonesia to estimate the relative effectiveness of these two types of aid on economic growth. This study is intended to analyse the effectiveness of project and program aid on economic growth in Indonesia over the period from 1970 to 2013. Characteristics of program and project aid in Indonesia are identified. The literature review explores cross-country and country-specific studies. The study used the Ordinary Least Squares (OLS) method to estimate the regression model. Stationarity tests and Johansen Cointegration test were also applied to address the data stationarity issues. All the classical assumption tests such as normality, multicolline

Keywords

Aid effectivenessMulticollinearityGovernment (linguistics)Ordinary least squaresEconomicsHeteroscedasticityDevelopment aidDeveloping country

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