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Aid, Political Business Cycles and Growth in Africa

Blessing Chiripanhura () and Miguel Niño‐Zarazúa
Authors registered in the RePEc Author Service: Miguel Angel Niño-Zarazúa ()

Journal of International Development, 2015, vol. 27, issue 8, 1387-1421

Abstract: This study develops a model of opportunistic behaviour in which an incumbent government resorts to expansionary fiscal and/or monetary stimuli to foster economic growth and thus, maximize the probability of re‐election. Using a panel dataset of 31 African countries covering the period 1980 to 2009, we test whether donor aid facilitates such political business cycles and investigate their effect on growth. We find evidence that donors, through guaranteeing support to incumbent governments, may unwittingly instigate political business cycles. With forbearance, and sometimes complicity by donors, aid seems to allow incumbent governments to instigate macroeconomic stimuli that ensure electoral victory with no fear of losing aid support. © 2015 UNU‐WIDER. Journal of International Development published by John Wiley & Sons, Ltd.

Date: 2015
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