On the substitutability between foreign aid and international credit
Subhayu Bandyopadhyay (),
Sajal Lahiri and
Javed Younas ()
No 2012-043, Working Papers from Federal Reserve Bank of St. Louis
We examine the effect of relaxing a binding borrowing constraint for a recipient country on theamount of foreign aid it receives. We do so by developing a two-country, two-period trade-theoretic model. The relaxation of the borrowing constraint reduces the flow of foreign aid, suggesting that the donor views developing nations' access to international credit markets as a substitute for foreign aid.
Keywords: Foreign aid program; International finance (search for similar items in EconPapers)
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Journal Article: On the substitutability between foreign aid and international credit (2013)
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