Review of Theoretical and Empirical Literatures on the Role of Foreign Aid to Developing Countries

This study provides reviews relating to the impact of foreign aid to economic growth. Several literatures suggested that, foreign aid has a directly positive impact of the economic growth. However, some studies empirically proved that, good economic environment is main prerequisites to ensure the positive impact of foreign aid to the economic growth. Furthermore, several studies have shown that, foreign aid has negative impact of the economic growth. Most of studies in previous literature has been analyzed the relationship between foreign aid and economic growth in East Asian economies and not in African countries. From this gap, new empirical studies in to examine the channels in which foreign aid affect economic growth is needed especially in African economies, which receive largest foreign aid for long time. Keywords: Foreign aid and Economic growth