Structural Adjustment, Aid, Debt and Growth

Shahrukh Rafi Khan
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Shahrukh Rafi Khan: Sustainable Development Policy Institute

Chapter 1 in Do World Bank and IMF Policies Work?, 1999, pp 15-31 from Palgrave Macmillan

Abstract: Abstract Aid theory in the early period of thinking in economic development was straightforward. The developing countries were perceived to be in need of substantial investments in infrastructure and capital which could not be financed internally. According to the traditional two-gap theory, aid was necessary to bridge both the savings—investment gap and the trade gap in developing countries, and was thus considered indispensable. Aid was advocated for establishing the preconditions for growth by strengthening institutions and building infrastructure and for enhancing growth via resources for investment. The increase in economic activity generated by aid-supported investments was expected to increase output growth, eventually generating enough income to render aid superfluous.

Keywords: Foreign Direct Investment; Granger Causality; Structural Adjustment; Granger Causality Test; Soft Budget Constraint (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37325-9_2

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DOI: 10.1057/9780230373259_2

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