A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan

Najid Ahmad; Sharafat Ali

A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan

Sharafat Ali § M. Phil. PhD

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Najid Ahmad ‡ M.Sc Economics

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§ Allama Iqbal Open University Islamabad

‡ Bahaudin Zakariya University Multan, Bahadur Campus ...

A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan

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Abstract

Pakistan economy is one those economies that has received a huge amount of foreign aid. Foreign aid has been considered to help capital-deficient economies to fulfill the desired levels of finances to generate growth, increase employment and income, and furthermore, it helps to alleviate poverty levels in the recipient economies. Present study focuses on the analysis of impact of foreign aid on income inequality in Pakistan. Since time series data is used for the analysis so the ADF and Phillip-Perron unit root test are applied to find out each of the time series to be stationary at its first difference. Johansen contegration test and vector error correction models are employed to examine the long run and short run impacts of growth, foreign aid, foreign direct investment, and labor force participation rate on income inequality, respectively. The cointegration test results confirm negative impact of economic growth on income inequality whereas foreign aid, foreign direct investment and labor force participation rate are concluded to have inequality increasing impacts. The results are statistically significant. Vector error correction model results showed long run causality as the coefficient of error correction term has the negative and significant coefficient. The Engle-Granger causality test showed bidirectional causality between aid and growth. The study also draws some conclusions and policy recommendations.

References

48 Cites in Article

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Sharafat Ali, Najid Ahmad. 2013. "A Time Series Analysis of Forieng Aid and Income Inequality in Pakistan". Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 13 (GJMBR Volume 13 Issue 30 (B5)).

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GJMBR Volume 13 Issue 30 (B5)

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Causality cointegration foreign aid foreign direct investment Growth rate labor force stationarity

Classification

GJMBR-B Classification JEL Code: E01

Submission ReceivedDecember 12, 2012
Peer Review Double Blind
Handling Editor
Accepted January 4, 2013
Published September 2, 2013

Version of record

v1.2

Issue date

September 2, 2013

Language

English

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Total Score: 102

Country: Pakistan

Subject: Global Journal of Management and Business Research - B: Economic & Commerce

Authors: Sharafat Ali, Najid Ahmad (PhD/Dr. count: 0)

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