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Local Financial Development and the Aid-Growth Relationship

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  • Sayek, Selin
  • Nkusu, Mwanza

Abstract

With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2006 with number 23.

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Date of creation: 2006
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Handle: RePEc:zbw:gdec06:4746

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Keywords: Foreign aid; economic growth; poverty; financial development;

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Cited by:
  1. Hovhannes Toroyan & George C. Anayiotos, 2009. "Institutional Factors and Financial Sector Development," IMF Working Papers 09/258, International Monetary Fund.
  2. James, Ang, 2009. "Financial Liberalization and the Aid-Growth Relationship in India," MPRA Paper 14411, University Library of Munich, Germany.
  3. John Serieux, 2008. "Financial Liberalization and Domestic Resource Mobilization in Africa: an Assessment," Working Papers 45, International Policy Centre for Inclusive Growth.

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