Foreign Aid and Productivity in Thailand

Abstract This study examines the relationship between foreign aid and total factor productivity (TFP) in Thailand from 1972 to 2013 using the VAR model and Granger causality. While discussing the role of foreign aid in the economy of recipient countries, it is important to examine whether foreign aid contributes to the productivity of the recipient country. Estimation results do not show any evidence of a relationship between foreign aid and the TFP in Thailand, indicating that foreign aid does not necessarily directly affect productivity. This result is also considered to be suitable for previous studies. JEL classification numbers: F35, O53. Keywords: Foreign Aid, Total Factor Productivity, Thailand.