Crowding out Effect of Foreign Aid in Selected Developing Countries: Panel Data Evidence

Sadegh Bakhtiari, Hojjat Izadkhasti and Seyed Komail Tayebi
Additional contact information
Sadegh Bakhtiari: Department of Economics, Islamic Azad University, Khorasgan Branch, Isfahan, Iran
Hojjat Izadkhasti: Candidate of Economics, University of Isfahan, Isfahan, Iran (Corresponding Author)
Seyed Komail Tayebi: Department of Economics, University of Isfahan, Isfahan, Iran

Iranian Economic Review (IER), 2013, vol. 18, issue 2, 51-64

Abstract: Public sector decision-makers are faced with the task of allocating resources among different alternative subject due budgetary constraints. In this paper Official Development Assistance (ODA) data have been considered as foreign aid. ODA is channeled through the public sector of recipient countries and, hence, the ultimate effect of ODA on savings or economic growth depends on how governments respond to it. This paper tries to explore the impact of official development assistance on public sector behavior in selected developing countries and contribute to the fiscal response literature on two main grounds. First, it specifies a fiscal response model. Second, using panel data model for a sample of 25 aid recipient countries in Asia and Latin America over the period 1991-2010. Empirical results indicate that official development assistance has a positive and significant effect on government investment expenditure, but it has not significantly impact on government current expenditures. Results also show that ODA crowds out both government revenue and public borrowing.

Keywords: Public Fiscal Behavior; Official Development Assistance; Panel Data. (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
ftp://80.66.179.253/eut/journl/20132-4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:18:y:2013:i:2:p:51

Access Statistics for this article

Iranian Economic Review (IER) is currently edited by Dr.Hossien Abbasinejad

More articles in Iranian Economic Review (IER) from Faculty of Economics,University of Tehran.Tehran,Iran Contact information at EDIRC.
Bibliographic data for series maintained by [z.rahimalipour] ().