The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Time Series Analysis
AbstractThis paper investigates the short-run macroeconomic impact of aid in small developing countries (SDCs) by using a vector auto regression (VAR) model to study the impact of aid on net import (absorption) and domestic demand (spending). We focus on average country effects within two country sub-groups, and find substantial differences between 'aid-dependent' SDCs and other SDCs that are more dependent on natural resources, tourism or financial services. In aid-dependent SDCs, aid absorption more or less equals spending, although only half of the aid flow is absorbed and spent. In the non-aid-dependent group, aid does not seem to be absorbed or spent in any systematic fashion.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Development Studies.
Volume (Year): 46 (2010)
Issue (Month): 5 ()
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Other versions of this item:
- Hansen, Henrik & Headey, Derek, 2009. "The short-run macroeconomic impact of foreign aid to small states: An agnostic time series analysis," IFPRI discussion papers 863, International Food Policy Research Institute (IFPRI).
- Hansen, Henrik & Headey, Derek, 2007. "The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Timeseries Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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