The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Time Series Analysis
Henrik Hansen () and
Derek Headey ()
Journal of Development Studies, 2010, vol. 46, issue 5, 877-896
This paper investigates 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.
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Working Paper: The short-run macroeconomic impact of foreign aid to small states: An agnostic time series analysis (2009)
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:taf:jdevst:v:46:y:2010:i:5:p:877-896
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