Foreign aid and domestic absorption
Jonathan Temple and
Nicolas Van de Sijpe
Journal of International Economics, 2017, vol. 108, issue C, 431-443
Abstract:
This paper introduces a new ‘supply-push’ instrument for foreign aid, to be used together with an instrumental variable estimator that filters out unobserved common factors. We use this instrument to study the effects of aid on macroeconomic ratios, and especially the ratios of consumption, investment, imports and exports to GDP. We cannot reject the hypothesis that aid is fully absorbed rather than used to build foreign reserves or exiting as capital flight, nor do we find evidence of Dutch Disease effects. Aid leads to higher consumption, while the evidence that it promotes investment is less robust.
Keywords: Foreign aid; Absorption; Dutch Disease; Common correlated effects (search for similar items in EconPapers)
JEL-codes: F35 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (31)
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http://www.sciencedirect.com/science/article/pii/S002219961730096X
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Related works:
Working Paper: Foreign Aid and Domestic Absorption (2015)
Working Paper: Foreign Aid and Domestic Absorption (2014)
Working Paper: Foreign Aid and Domestic Absorption (2014)
Working Paper: Foreign Aid and Domestic Absorption (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:c:p:431-443
DOI: 10.1016/j.jinteco.2017.07.010
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