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Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions

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  • Bayale, Nimonka

Abstract

This paper analyzes the effect of different types of foreign aid on tax revenues in West African Economic and Monetary Union (WAEMU) countries. A fixed-effects panel model with instrumental variables was developed over the period spanning from 1985 to 2016. The results indicate that multilateral aid affects positively and significantly tax revenues while bilateral aid does not. Moreover, the analysis of the decomposed effect of aid revealed that concessional aid and technical assistance enhance fiscal resources mobilization. However, grants reduce tax effort. The results also show that when aid is aggregated, its effect on tax revenues is ambiguous. These results justify for many reasons the reorientation of foreign aid towards investment for effective tax systems in WAEMU countries in compliance with Addis Ababa Action Agenda 2015 of the third international conference on Financing for Development. Strengthening multilateral partnership is advocated in accordance with the 17th Sustainable Development Goals. Also, an improvement of institutional quality could make foreign aid more efficient for tax collection in the study areas.

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  • Bayale, Nimonka, 2020. "Foreign Aid and Fiscal Resources Mobilization in WAEMU Countries: Ambiguous Effects and New Questions," MPRA Paper 101742, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101742
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    Cited by:

    1. Bayale, Nimonka & Tchagnao, Abdou-Fataou & Chavula, Hopestone Kayiska, 2020. "More elections, more burden? On the relationship between elections and public debt in Africa," MPRA Paper 101744, University Library of Munich, Germany.
    2. Nimonka Bayale & Pouwemdéou Tchila & Jacques‐Patrick Arnold Yao & Honoré Tenakoua, 2022. "Do tax administration reforms improve tax revenue performance in Togo? Empirical insights from experimental approaches," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 196-213, June.
    3. Nimonka Bayale & Abdou‐Fataou Tchagnao & Madow Nagou & Pouwemdéou Tchila, 2023. "Beneficial impact of tax reforms on tax revenue performances in Togo: Myth or reality?," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1323-1343, October.
    4. Milly Chepkorir Chebochok & Nimonka Bayale, 2023. "Effects of financial inclusion on tax revenue mobilization: Evidence from WAEMU countries," African Development Review, African Development Bank, vol. 35(2), pages 226-238, June.

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    More about this item

    Keywords

    Foreign aid types; Tax revenues; Panel data analysis; WAEMU;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F35 - International Economics - - International Finance - - - Foreign Aid

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