Is Aid-FDI-Financial Development Dynamics a Vanguard for Economic Growth? Perspective of the Emerging Asian Economies

ABSTRACT

We study how aid, foreign capital inflows, and financial development impact economic growth, along with the role of productive capacity in emerging Asian economies spanning from 1990 to 2020. The results of the study reveal that foreign aid, foreign capital inflows, and financial development positively contribute to economic growth, while human development and institutional quality reflect a negative association. Moreover, the interaction effects state that aid-led financial development negates growth, while FDI-led financial development amplifies growth. Overall, our empirical findings suggest that emerging Asian economies need to adopt sustainable prudent macroeconomic dynamics to revive growth in a robust manner.

KEYWORDS:

• Asian economies
• economic growth
• FDI
• financial development
• foreign aid

Acknowledgments

The authors duly acknowledge the data sources made available by the World Bank and the Heritage Foundation. The authors would also like to thank colleagues and friends for their constant support. No funding was provided during any part of the research.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data references

Data used in the analysis was compiled from the following secondary sources:

https://databank.worldbank.org/source/world-development-indicators

https://www.heritage.org/index/