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Original scientific paper

Foreign Financial Aid, Government Policies and Economic Growth: Does the Policy Setting in Developing Countries Matter?

Tashrifov Yusuf ; The National bank of Tajikistan, Dushanbe, Tajikistan

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Does foreign aid contribute to economic growth? If so, is the impact of aid conditional
on good policies? This is a controversial issue. While the World Bank (1998) contends
that the aid is effective only if recipient governments have good policies, others refute
this view and argue that aid enhances economic growth regardless of the type of policies.
This paper proposes new measures of policy that are more directly controlled by recipient
governments and examines whether any signifi cant relationship exists between foreign aid,
government policies and economic growth. It is revealed that foreign aid has a positive
impact on real growth per capita and this effect is not contingent upon the type of economic
policies adopted by the recipient countries.


World Bank, Foreign Aid, Government Policies, Economic Growth and Generalised Method of Moments

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