Aid and Income: Another Time-series Perspective

Matthijs Lof, Tseday Mekasha () and Finn Tarp

World Development, 2015, vol. 69, issue C, 19-30

Abstract: This study provides a replication of the empirical results reported by Nowak-Lehmann, Dreher, Herzer, Klasen, and Martínez-Zarzoso (2012) (henceforth NDHKM). We uncover that NDHKM relied on a regression model which included a log transformation of variables that are not strictly positive. This led to nonrandom omission of a large proportion of observations. Furthermore, we show that NDHKM’s use of co-integrated regressions is not a suitable empirical strategy for estimating the causal effect of aid on income. Evidence from a Panel VAR model estimated on the dataset of NDHKM, suggests a positive and statistically significant long-run effect of aid on income.

Keywords: foreign aid; growth; time-series; VAR models (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (26)

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Working Paper: Aid and Income: Another Time-Series Perspective (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:69:y:2015:i:c:p:19-30

DOI: 10.1016/j.worlddev.2013.12.015

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