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The short-run macroeconomic impact of foreign aid to small states: An agnostic time series analysis

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Hansen, Henrik
Headey, Derek

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Abstract

"We herein investigate 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." from authors' abstract

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Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 863.

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Date of creation: 2009
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Handle: RePEc:fpr:ifprid:863

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Keywords: Foreign aid; Small states; Vector auto regression; Mean group estimator; Macroeconomic impacts; Development strategies; Public investment;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. McGillivray, Mark & Morrissey, Oliver, 2001. "Fiscal Effects of Aid," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  2. Akpalu, Wisdom & Hassan, Rashid M. & Ringler, Claudia, 2008. "Climate variability and maize yield in South Africa: Results from GME and MELE methods," IFPRI discussion papers 843, International Food Policy Research Institute (IFPRI). [Downloadable!]
  3. Craig Burnside & David Dollar, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September. [Downloadable!] (restricted)
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  4. Ngeleza, Guyslain K. & Muhammad, Andrew, 2009. "Preferential trade agreements between the monetary community of Central Africa and the European Union: Stumbling or building blocks? A general equilibrium approach," IFPRI discussion papers 859, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Pallage, Stephane & Robe, Michel A, 2001. "Foreign Aid and the Business Cycle," Review of International Economics, Blackwell Publishing, vol. 9(4), pages 641-72, November. [Downloadable!] (restricted)
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  6. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
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  7. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
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  8. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers 1, Chicago - Graduate School of Business.
  9. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December. [Downloadable!] (restricted)
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  10. Streeten, Paul, 1993. "The special problems of small countries," World Development, Elsevier, vol. 21(2), pages 197-202, February. [Downloadable!] (restricted)
  11. Harvey W. Armstrong & Robert Read, 2002. "The phantom of liberty?: economic growth and the vulnerability of small states," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(4), pages 435-458. [Downloadable!]
  12. Magalhaes, Eduardo & Diao, Xinshen, 2009. "Productivity convergence in Brazil: The case of grain production," IFPRI discussion papers 857, International Food Policy Research Institute (IFPRI). [Downloadable!]
  13. Rodrik, Dani, 2005. "Growth Strategies," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 14, pages 967-1014 Elsevier. [Downloadable!] (restricted)
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  14. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 1, Center for International Development at Harvard University. [Downloadable!]
  15. Spielman, David J. & Kelemework, Dawit, 2009. "Measuring agricultural innovation system properties and performance: Illustrations from Ethiopia and Vietnam," IFPRI discussion papers 851, International Food Policy Research Institute (IFPRI). [Downloadable!]
  16. Petracco, Carly K. & Pender, John, 2009. "Evaluating the impact of land tenure and titling on access to credit in Uganda:," IFPRI discussion papers 853, International Food Policy Research Institute (IFPRI). [Downloadable!]
  17. Briguglio, Lino, 1995. "Small island developing states and their economic vulnerabilities," World Development, Elsevier, vol. 23(9), pages 1615-1632, September. [Downloadable!] (restricted)
  18. Sanjeev Gupta & Peter S. Heller, 2002. "Challenges in Expanding Development Assistance," IMF Policy Discussion Papers 02/5, International Monetary Fund.
  19. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October. [Downloadable!] (restricted)
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  20. Easterly, William & Kraay, Aart, 2000. "Small States, Small Problems? Income, Growth, and Volatility in Small States," World Development, Elsevier, vol. 28(11), pages 2013-2027, November. [Downloadable!] (restricted)
  21. Asenso-Okyere, Kwadwo & Asante, Felix A. & Tarekegn, Jifar & Andam, Kwaw S., 2009. "The linkages between agriculture and malaria: Issues for policy, research, and capacity strengthening," IFPRI discussion papers 861, International Food Policy Research Institute (IFPRI). [Downloadable!]
  22. Read, Robert, 2001. "Growth, Economic Development and Structural Transition in Small Vulnerable States," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  23. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Asenso-Okyere, Kwadwo & Workneh, Sindu & Rhodes, Edward & Sutherland, John, 2009. "Rebuilding after emergency: Revamping agricultural research in Sierra Leone after civil war," IFPRI discussion papers 869, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. Calzadilla, Alvaro & Zhu, Tingju & Rehdanz, Katrin & Tol, Richard S.J. & Ringler, Claudia, 2009. "Economywide impacts of climate change on agriculture in Sub-Saharan Africa:," IFPRI discussion papers 873, International Food Policy Research Institute (IFPRI). [Downloadable!]
  3. Dillon, Andrew, 2009. "Measuring child labor: Comparisons between hours data and subjective measures," IFPRI discussion papers 879, International Food Policy Research Institute (IFPRI). [Downloadable!]
  4. Bouet, Antoine & Debucquet, David Laborde, 2009. "The potential cost of a failed doha round:," IFPRI discussion papers 886, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  5. Thurlow, James & George, Gavin & Gow, Jeff, 2009. "HIV/AIDS, growth and poverty in KwaZulu-Natal and South Africa: Integrating firm-level surveys with demographic and economywide modeling," IFPRI discussion papers 864, International Food Policy Research Institute (IFPRI). [Downloadable!]
  6. Rao, B. Bhaskara & Sharma, Kanhaiya Lal & Singh, Rup, 2007. "Estimating aid-growth equations: the case of Pacific Island countries," MPRA Paper 4554, University Library of Munich, Germany, revised 09 Sep 2007. [Downloadable!]
  7. Diao, Xinshen, 2009. "Economywide impact of avian flu in Ghana: A dynamic CGE model analysis," IFPRI discussion papers 866, International Food Policy Research Institute (IFPRI). [Downloadable!]
  8. Ulimwengu, John M. & Ramadan, Racha, 2009. "How does food price increase affect Ugandan households?: An augmented multimarket approach," IFPRI discussion papers 884, International Food Policy Research Institute (IFPRI). [Downloadable!]
  9. de Moraes, Marcia Maria Guedes Alcoforado & Cai, Ximing & Ringler, Claudia & Albuquerque, Bruno Edson & da Rocha, Sérgio P. Vieira & Amorim, Carlos Alberto, 2009. "Joint water quantity/quality management analysis in a biofuel production area: Using an integrated economic-hydrologic model," IFPRI discussion papers 867, International Food Policy Research Institute (IFPRI). [Downloadable!]
  10. Yamauchi, Futoshi & Yohannes, Yisehac & Quisumbing, Agnes R., 2009. "Natural disasters, self-Insurance, and human capital investment: Evidence from Bangladesh, Ethiopia, and Malawi," IFPRI discussion papers 881, International Food Policy Research Institute (IFPRI). [Downloadable!]
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