Impact of official development assistance & and foreign direct investment on economic growth of Afghanistan (1982 – 2021)

Abstract

Following MA Thesis focuses on examining the effects of Official Development Assistance (ODA) and Foreign Direct Investment (FDI) on the economic growth of Afghanistan from 1982 to 2021. The proposed research employed quantitative research methods, including econometric modeling and statistical analysis, to analyze the sector- specific impacts of ODA and FDI on key areas such as infrastructure, education, healthcare, and governance structures. By investigating the relationships between ODA, FDI, and economic growth indicators like GDP, Unemployment Rate, Inflation Rate, Trade Balance Coverage Rate, Real Interest Rate, and revolutions which happened during past 40 years, this study aims to provide a comprehensive understanding of how these financial resources shape Afghanistan's overall economic growth. In this research, I used time series data for 40 years (1982-2021), in which GDP is dependent variable while all others are independent variables. Additionally, the research explored the potential synergies between ODA and FDI, examining how their combined presence can lead to enhanced development outcomes. Utilizing econometric techniques such as unit root tests, Cointegration Analysis, and Granger Causality Tests, the study has assessed the long-term relationships and causal linkages between ODA, FDI, and economic growth in Afghanistan. The findings of this research will contribute to the existing literature on the impact of ODA and FDI, informing policymakers and development practitioners in Afghanistan. By identifying areas of strength, weakness, and potential improvement in the utilization of ODA and FDI, this study aims to provide evidence-based insights for sustainable economic development strategies in Afghanistan.