Can foreign aid (ODA) effectively contribute to the UNs sustainable development goal for economic growth in the least developed countries?

Abstract

Examining a panel of 40 countries and variables observed over the past 24 years, this study provides evidence of foreign aids’ short- and long-term effects on real Gross Domestic Product (GDP) growth. By including both governance and social variables as exogenous we observe a significant positive long-term effect of aid on GDP. The short-term effect is reported to be negative, but at a lower level of significance. The results are robust to different regression methods and aligns with economic growth theory. We find evidence suggesting that aid contributes to sustained GDP growth as defined by the UNs sustainable development goals.