Aid-Export Nexus: Empirical Evidence from Nepal

This paper analyses the association between foreign aid and the export performance of Nepal using the annual data for the period from 1980 to 2020. The main objectives of this paper are to document the trend and patterns of foreign aid and export performance of Nepal and to assess the role of foreign aid in the export performance of Nepal. For this purpose, an Autoregressive Distributed Lag (ARDL) model is used. The major finding from this paper sug-gests that foreign aid has a significant negative impact on the export perfor-mance of Nepal referring that a one per cent increase in foreign aid causes to decrease in the exports on average by about half a per cent. Also, the paper detects a significant positive long-run relationship between Gross Domestic Product Per Capita (GDPPC) and exports. The main policy inference from this paper is that the stakeholders and policymakers should be serious about the proper use of foreign aid, particularly focusing on the infrastructure building required for the export performance of the country.