1 The Effect of Foreign Aid on Economic Growth in Developing Countries

This paper analyzes the effects of foreign aid on the economic growth of developing countries. The study uses annual data on a group of 85 developing countries covering Asia, Africa, and Latin America and the Caribbean for the period 1980-2007. We explore the hypothesis that foreign aid can promote growth in developing countries. We test this hypothesis using panel data series for foreign aid, while accounting for regional differences in Asian, African, Latin American, and the Caribbean countries as well as the differences in income levels. While the findings of previous studies are generally mixed, our results also indicate that foreign aid has mixed effects on economic growth in developing countries