Economic Growth and the Role of Official Development Assistance in Lower-Middle-Income Countries: Focusing on the Kyrgyz Republic

This study examines the impact of official development assistance on the economic growth of the Kyrgyz Republic and lower-middle-income countries. Using the ordinary least squares approach, this study analyzed official development assistance in Kyrgyzstan from 1992 to 2020 and applied a fixed-effects model to a panel dataset of 40 lower-middle-income countries. We also considered factors such as inflation, trade openness, gross capital formation, and political instability. The results revealed that official development assistance had no significant impact on economic growth in Kyrgyzstan. However, it had a positive influence on the growth of lower-middle-income countries. Trade openness and gross capital formation had a favorable impact on economic development, whereas inflation and political instability adversely impacted growth. Further regional analysis revealed that the impact of foreign aid varies, with no significant effect observed in Latin America, the Caribbean, or East Asia.