EconPapers    
Economics at your fingertips  
 

Fiscal Effects of Aid in Ethiopia: Evidence from CVAR applications

Giulia Mascagni and Emilija Timmis

Discussion Papers from University of Nottingham, CREDIT

Abstract: This paper explores the fiscal effects of aid in Ethiopia, using national data from 1960 to 2009, which is a longer series than most studies in this literature. This data includes the measure of aid that is flowing through the budget as measured by the recipient. We use the Cointegrated VAR methodology to model complex long run and short run dynamics amongst the following variables: aid grants, aid loans, tax revenue, non-tax revenue, and public expenditure. We also estimate an alternative model, where expenditure is disaggregated into capital and recurrent components (with aggregated domestic revenues to preserve degrees of freedom) in order to explore aid-spending relationships. The CVAR analysis is complemented by an in-depth qualitative understanding of the Ethiopian context, which ensures sound model specification and sensible interpretation of estimated results. Taking into account the major political regime changes, the data suggests three main conclusions regarding long run equilibrium relationships: government long-term spending plans are based on domestic sources, treating aid as an additional source of revenue; aid is positively associated with, and adjusts to, spending, with a particularly strong relation between capital expenditure and grants; and both grants and loans are positively related to tax revenue, both in the long and in the short-run.

Keywords: CVAR; Ethiopia; fiscal effects; aid; revenue. (search for similar items in EconPapers)
Date: 2014-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
https://www.nottingham.ac.uk/credit/documents/papers/2014/14-06.pdf (application/pdf)

Related works:
Journal Article: The Fiscal Effects of Aid in Ethiopia: Evidence from CVAR Applications (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:not:notcre:14/06

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, CREDIT School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().

 
Page updated 2020-03-29
Handle: RePEc:not:notcre:14/06