The short-run macroeconomic impact of foreign aid to small states: An agnostic time series analysis

Henrik Hansen and Derek Headey

No 863, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: "We herein investigate the short-run macroeconomic impact of aid in small developing countries (SDCs) by using a vector auto regression (VAR) model to study the impact of aid on net import (absorption) and domestic demand (spending). We focus on average country effects within two country sub-groups, and find substantial differences between ‘aid-dependent' SDCs and other SDCs that are more dependent on natural resources, tourism or financial services. In aid-dependent SDCs, aid absorption more or less equals spending, although only half of the aid flow is absorbed and spent. In the non-aid-dependent group, aid does not seem to be absorbed or spent in any systematic fashion." from authors' abstract

Keywords: Foreign aid; Small states; Vector auto regression; Mean group estimator; Macroeconomic impacts; Development strategies; Public investment (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Time Series Analysis (2010)
Working Paper: The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Timeseries Analysis (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fpr:ifprid:863

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