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Local Financial Development and the Aid-Growth Relationship

Selin Sayek () and Mwanza Nkusu

No 23, Proceedings of the German Development Economics Conference, Berlin 2006 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis.

Keywords: Foreign aid; economic growth; poverty; financial development (search for similar items in EconPapers)
JEL-codes: F35 I30 O40 O50 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-afr, nep-dev and nep-fdg
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