A dynamic modelling of the regional and international political economy of US aid to Pakistan

This study takes a unique approach by empirically examining the political economy of US aid to Pakistan in the South Asian regional strategic context, including the geopolitics of China, India, Iran, and Russia. Using the dynamic Autoregressive Distributed Lag (ARDL) method from 1971 to 2016, we find that US economic assistance responds positively to regional wars in Afghanistan and the Indo-Russian strategic relationship in the long run. The improvement in the relationship between India and Pakistan increases US economic aid in the short run but reduces it in the long run. The Pak-Iran economic relationship reduces US economic assistance in the short run while in the long run, it is positive but insignificant. Washington’s policy for South Asia is now more China-centric in reshaping regional geopolitics. The US-foreign-aid-policy instrument generally plays a dynamic role in achieving manifold strategic objectives in the South Asian region. These findings contribute to a deeper understanding of the complex dynamics of foreign aid and geopolitical relationships.