Asymmetric Impact of Official Development Assistance on Agriculture Sector Growth of Pakistan in the Presence of Governance: A Nonlinear ARDL Approach

Abstract

The study's objective is to examine the impact of official development assistance on agriculture growth in Pakistan. The novelty of the research lies to look into asymmetric role of official development assistance and by introducing governance indicators as interacting variables with official development assistance to see the combined effect on agriculture growth. The study used pre-Covid-19 data from 1985–2019 to analyze the pure effect of ODA, as, during the COVID-19 pandemic, aid largely flows to the health sector of the economy. The study applied a nonlinear ARDL technique to find the relationships among the variables. The results indicate that official development assistance affects agriculture growth asymmetrically. We also analyzed the moderating effects of corruption and political stability on the agriculture-growth. We found that the interacting effect of corruption has a positive impact on agricultural growth in the short and long term. Individually, corruption has a significant negative impact on agriculture's growth. Political stability's interactive influence has been statistically insignificant. Inflation and population are statistically unimportant, although population growth has a considerable positive effect on the agriculture sector in the short run. The study's findings include policy recommendations on official development aid adjustments that significantly impact Pakistan's agriculture sector growth.