Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa

Jean-Louis Combes and Rasmane Ouedraogo ()

No 201424, Working Papers from CERDI

Abstract: This paper examines the so-popular anecdote according to which pro-cyclical fiscal policies are due to pro-cyclical behavior of financing. We address the question of whether or not pro-cyclical aid leads to pro-cyclical fiscal policies in SSA recipient countries. We employed panel data techniques covering 39 SSA countries over the period 1985- 2012. We found that results depend on the type of aid: pro-cyclical bilateral aid is negatively associated to pro-cyclical fiscal policy, while pro-cyclical ODA from multilateral agencies leads to more pro-cyclical fiscal policy. This finding is robust to potential error bias, alternative specifications, additional controls and different estimation methods.

Keywords: Sub-Saharan Africa; Official development assistance; Fiscal policy; Pro-cyclicality (search for similar items in EconPapers)
JEL-codes: E32 E62 F35 F41 F42 O19 (search for similar items in EconPapers)
Pages: 66
Date: 2014-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Working Paper: Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa (2014)
Working Paper: Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa (2014)
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