Ghost of the financing gap: an overlooked aspect of the aid debate
In the decades-old intense debate on foreign aid, a great deal has been said about qualitative aspects of aid and aid-effectiveness (i.e. fungibility, among other things). The latest landmark in the debate was the World Bank publication Assessing Aid: What Works, What Doesn't, and Why, which generated a new wave of controversy about foreign aid and policy conditionality. Much of the recent debate has focused on the qualitative aspects of the aid-growth relationship and the role of 'good' policies. However, little attention had been paid so far to some important quantitative aspects. The present study draws attention to this often overlooked aspect of the aid debate to demonstrate that the level of aid requirements of a country is an equally important and integral part of aid and aid-effectiveness. Estimation of the magnitude of external assistance requirements of countries used by international financial institutions is compared with an alternative model, the so-called 'Balance of Payments Constrained Growth Model' (based on the Harrod trade multiplier). It is revealed that the latter is not a real alternative as it is an incomplete model. More importantly, it is shown that international financial institutions use these quantitative frameworks in a very flexible and pragmatic way to carry on a meaningful policy dialogue with both donors and recipient countries, which has an important bearing on overall aid and aid-effectiveness. Copyright © 2004 John Wiley & Sons, Ltd.
Volume (Year): 16 (2004)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/journal/5102/home|
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.:
- J. J. Polak, 1997. "The IMF Monetary Model At Forty," IMF Working Papers 97/49, International Monetary Fund.
- Iqbal, Z. & James, M.J. & Pyatt, G., 2000.
"Three gap analysis of structural adjustment in Pakistan,"
Other publications TiSEM
5e27cd96-ac5f-45b1-898d-f, Tilburg University, School of Economics and Management.
- Iqbal, Zafar & James, Jeffrey & Pyatt, Graham, 2000. "Three-Gap Analysis of Structural Adjustment in Pakistan," Journal of Policy Modeling, Elsevier, vol. 22(1), pages 117-138, January.
- Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
- Louis Dicks-Mireaux & Miguel A Savastano & Adam Bennett & MarÃa Vicenta Carkovic S. & Mauro Mecagni & James A John & Susan M Schadler, 1995. "IMF Conditionality; Experience Under Stand-by and Extended Arrangements, Part I: Key Issues and Findings," IMF Occasional Papers 128, International Monetary Fund.
- Bolnick, B.R., 1999. "The Role of Financial Programming in Macroeconomic Policy Management," Papers 720, Harvard - Institute for International Development.
- Erkin Bairam & Lawrence Ng, 2001. "Thirlwall's Law and the Stability of Export and Import Income Elasticities," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 287-303.
- Khan, Mohsin S. & Montiel, Peter & Haque, Nadeem U., 1990. "Adjustment with growth : Relating the analytical approaches of the IMF and the World Bank," Journal of Development Economics, Elsevier, vol. 32(1), pages 155-179, January.
- Mohsin S. Khan & Peter J. Montiel, 1989. "Growth-Oriented Adjustment Programs: A Conceptual Framework," IMF Staff Papers, Palgrave Macmillan, vol. 36(2), pages 279-306, June.
- P. Guillaumont & L. Chauvet, 2001.
"Aid and Performance: A Reassessment,"
Journal of Development Studies,
Taylor & Francis Journals, vol. 37(6), pages 66-92.
- Krugman, Paul, 2000. "How Complicated Does the Model Have to Be?," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 33-42, Winter.
- Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129.
- Easterly, William, 1997. "The ghost of financing gap : how the Harrod-Domar growth model still haunts development economics," Policy Research Working Paper Series 1807, The World Bank.
- Taylor, Lance, 1994. "Gap models," Journal of Development Economics, Elsevier, vol. 45(1), pages 17-34, October.
- Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
- M. Nureldin Hussain, 2001. ""Exorcising the Ghost": An Alternate Model for Measuring the Financing Gap in Developing Countries," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 24(1), pages 89-124, October.
- Dawn Richards Elliott & Rupert Rhodd, 1999. "Explaining growth rate differences in highly indebted countries: an extension to Thirlwall and Hussain," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1145-1148.
- C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
- Robert Lensink & Howard White, 2000. "Aid allocation, poverty reduction and the Assessing Aid report," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 399-412.
- Iqbal, Z., 1996. "Three-gap analysis of structural adjustment in Pakistan," Other publications TiSEM aeeac5ac-5ac4-4069-a07e-2, Tilburg University, School of Economics and Management.
- A. Sepehri & S. Moshiri & M. Doudongee, 2000. "The Foreign Exchange Constraints to Economic Adjustment: The case of Iran," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(2), pages 235-251.
- F. Rozwadowski & Siddharth Tiwari & David O. Robinson & Susan M Schadler, 1993. "Economic Adjustment in Low-Income Countries; Experience Under the Enhanced Structural Adjustment Facility," IMF Occasional Papers 106, International Monetary Fund.
- Zafar Iqbal, 1995. "Constraints to the Economic Growth of Pakistan: A Three-gap Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 1119-1133.
- M. Doornbos, 2001. "'Good Governance': The Rise and Decline of a Policy Metaphor?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 93-108.
- N. Hermes & R. Lensink, 2001. "Changing the Conditions for Development Aid: A New Paradigm?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 1-16.
- Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
- Miguel A Savastano & Michael Mussa, 1999. "The IMF Approach to Economic Stabilization," IMF Working Papers 99/104, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:wly:jintdv:v:16:y:2004:i:4:p:637-652. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.