Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa

Jean-Louis Combes and Rasmané Ouedraogo
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Rasmané Ouedraogo: CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the so-popular anecdote according to which pro-cyclical fiscal policies are due to pro-cyclical behavior of financing. We address the question of whether or not pro-cyclical aid leads to pro-cyclical fiscal policies in SSA recipient countries. We employed panel data techniques covering 39 SSA countries over the period 1985- 2012. We found that results depend on the type of aid: pro-cyclical bilateral aid is negatively associated to pro-cyclical fiscal policy, while pro-cyclical ODA from multilateral agencies leads to more pro-cyclical fiscal policy. This finding is robust to potential error bias, alternative specifications, additional controls and different estimation methods.

Keywords: pro-cyclicality; fiscal policy; official development assistance; Sub-Saharan Africa (search for similar items in EconPapers)
Date: 2014-11-19
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01084600
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Working Paper: Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa (2014)
Working Paper: Does Pro-cyclical Aid Lead to Pro-cyclical Fiscal Policy? An Empirical Analysis for Sub-Saharan Africa (2014)
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