FOREIGN AID AND DOMESTIC SAVINGS: THE CROWDING OUT EFFECT

Michael Shields

No 35-07, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: The paper examines the relationship between foreign aid and savings using annual data for 119 countries. Regressions for each country are run separately in order to find which countries have a positive aid-saving experience. The explanatory variables chosen are thought to be exogenous to current economic policy. Countries are placed into five categories according to the strength of the aid-saving relationship. Few countries show evidence of substantial crowding out. Consequently, aid is found to be clearly beneficial to saving and, hence, investment for the preponderance of these countries.

Pages: 16pages
Date: 2007
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Citations: View citations in EconPapers (5)

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