Advanced Search
MyIDEAS: Login to save this paper or follow this series

Macroeconomic Issues in Foreign Aid

Contents:

Author Info

  • Peter Hjertholm

    (Institute of Economics, University of Copenhagen)

  • Jytte Laursen

    (Danish Ministry of Foreign Affairs (Danida))

  • Howard White

    (University of Sussex, IDS)

Abstract

The macroeconomic rationale for aid relates to its ability to supplem­ent savings, foreign exchange and government revenue, thus contributing to ­growth. This processes presumes a simple ­Harrod-Domar context in which growth is driven by physical capital formation. ­However, the macroeconomic reality of aid is more complicated. Three areas of complication are discussed: (i) the effects of aid on fiscal behaviour, (ii) debt problems and (iii) Dutch disease effects. In the long run, rather than merely filling gaps, aid should help close­ gaps, since reliance on future aid and foreign borrowing is thus diminished and economic policy autonomy is increased. Closing the savings gap entails financial and technical support for mobilisation of domestic savings. Closing the trade gap entails supporting a macro environment conducive to export growth, helping to expand and improve physical infrastructure and direct support for export activities, notably those of a non-traditional nature. Closing the fiscal gap entails support for increasing government revenue and improving expenditure management, which is the more delicate task since donors and recipient governments have to carefully balance the disadvantage of lower-than-needed government spending against the disadvantage of higher, and potentially distortionary, taxation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0005.pdf/
Download Restriction: no

Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 00-05.

as in new window
Length: 61 pages
Date of creation: Mar 2000
Date of revision:
Handle: RePEc:kud:kuiedp:0005

Contact details of provider:
Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Email:
Web page: http://www.econ.ku.dk
More information through EDIRC

Related research

Keywords: Foreign Aid; Macroeconomics of Aid; Gap Models; Aid Fungibility; Fiscal Response Models; Foreign Debt; Dutch Disease;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hodler, Roland & Dreher, Axel, 2013. "Development (paradigm) failures," Journal of Development Economics, Elsevier, vol. 101(C), pages 63-74.
  2. Dao, Minh Quang, 2011. "Debt and Growth in Developing Countries - Debito e crescita nei paesi in via di sviluppo," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 64(2), pages 173-193.
  3. James McHugh & Theodora Kosma & Dimitri G. Demekas, 2002. "The Economics of Post Conflict Aid," IMF Working Papers 02/198, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0005. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.