THEORETICAL ANALYSIS OF FOREIGN AID, POLICIES AND STATE INSTITUTIONS

Vilaphonh Xayavong, Rukmani Gounder and James Obben

No 23704, Discussion Papers from Massey University, Department of Applied and International Economics

Abstract: This paper re-examines the theoretical aid-growth nexus by expounding on the issues relating to policies designed for aid delivery and the lack of aid recipient's state institutional capability to enforce policy conditionality. Two propositions have been demonstrated to explain why policy conditionality attached to aid might not always promote sustainable economic growth in Least Developed Countries. First, the model has simulated that a stable aid flow contributes to economic growth even when aid is fungible. Second, the model has also simulated that unstable aid inflow impairs the favourable effect of stable aid inflow. It is suggested that the contribution of aid to economic growth depends not only on the ability of aid to increase investment in the recipient country but also the quality of policy conditionality and the state and institutional capability of the recipient country to implement policy conditionality.

Keywords: Food; Security; and; Poverty (search for similar items in EconPapers)
Pages: 25
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:masddp:23704

DOI: 10.22004/ag.econ.23704

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