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Recent developments in fiscal response with an application to Costa Rica

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  • Susana Franco‐Rodriguez

Abstract

This paper uses the framework of Fiscal Response Models to analyse the impact of foreign assistance on recipient government's behaviour. Such models provide a means of examining the impact of aid on taxation and expenditure decisions. In the theoretical model presented here foreign aid has been endogenized to account for the fact that governments have some influence over the amount of aid committed to the country, and considerable influence over disbursements. Thus, fiscal planning will be based on targets for expenditures and revenues, the latter including aid. This permits a more complete examination of the effects of aid on government fiscal behaviour than do standard fungibility models. The model is illustrated in an application to Costa Rica, where the effect of aid on government allocation of resources appears to have been negligible. Copyright © 2000 John Wiley & Sons, Ltd.

Suggested Citation

  • Susana Franco‐Rodriguez, 2000. "Recent developments in fiscal response with an application to Costa Rica," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 429-441, April.
    • Handle: RePEc:wly:jintdv:v:12:y:2000:i:3:p:429-441
    DOI: 10.1002/(SICI)1099-1328(200004)12%3A3%3C429%3A%3AAID-JID660%3E3.0.CO%3B2-W
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    References listed on IDEAS

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    Cited by:

    1. Roberto Machado, 2010. "Aid and fiscal policy in Nicaragua: A fiscal response analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(4), pages 483-502.
    2. Leanora Alecia Brown & Jorge Martinez-Vazquez, 2015. "International Debt Forgiveness: Who Gets Picked and Its Effect On The Tax Effort Of Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1504, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. G Mavrotas & B Ouattara, 2003. "The Composition of Aid and the Fiscal Sector in an Aid-Recipient Economy: A model," Economics Discussion Paper Series 0307, Economics, The University of Manchester.
    4. Giulia Mascagni, 2014. "Aid and Taxation: Evidence from Ethiopia," Working Paper Series 7314, Department of Economics, University of Sussex Business School.
    5. Djedje Hermann Yohou & Michaël Goujon & Bertrand Laporte & Samuel Guérineau, 2016. "Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects," Working Papers halshs-01321620, HAL.
    6. Yongzheng Yang & Mr. Robert Powell & Mr. Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 2005/179, International Monetary Fund.
    7. World Bank, 2007. "Niger - Accelerating Growth and Achieving the Millennium Development Goals : Diagnosis and the Policy Agenda," World Bank Publications - Reports 7658, The World Bank Group.
    8. Neva Novarro, 2004. "Do Policy-Makers Earmark to Constrain their Successors? The Case of Environmental Earmarking," Working Papers 0408, College of the Holy Cross, Department of Economics.
    9. Musharraf Cyan & Jorge Martinez-Vazquez & VIoleta Vulovic, 2013. "Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1308, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    10. George Mavrotas, 2003. "Which Types of Aid Have the Most Impact?," WIDER Working Paper Series DP2003-85, World Institute for Development Economic Research (UNU-WIDER).
    11. Simon Feeny & Mark McGillivray, 2003. "Aid and public sector borrowing in developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 989-998.
    12. George Mavrotas, 2005. "Aid heterogeneity: looking at aid effectiveness from a different angle," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1019-1036.
    13. George Mavrotas & Bazoumana Ouattara, 2003. "Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from Côte d'Ivoire," WIDER Working Paper Series DP2003-15, World Institute for Development Economic Research (UNU-WIDER).
    14. Ramesh Durbarry, 2004. "Foreign aid: is it all consumed?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 189-199.

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