Macroeconomic Effect of Foreign Aid

Macroeconomic Issues in Foreign Aid

The macroeconomic rationale for aid relates to its ability to supplement savings, foreign exchange and government revenue, thus contributing to growth. This processes presumes a simple Harrod-Domar context in which growth is driven by physical capital formation. However, the macroeconomic reality of aid is more complicated. Three areas of complication are discussed: (i) the effects of aid on fi...

Foreign Aid, Poor Data, and the Fragility of Macroeconomic Inference

The link between foreign aid and economic growth remains a controversial issue in the literature, and a large share of the disagreement could be explained by differences in the data employed. Using GDP data from three different versions of the Penn World Table and the World Development Indicators, I investigate the robustness of Juselius, Møller and Tarp (2014)'s (JMT) conclusions about long-ru...

The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Time Series Analysis

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Consequences of Aid Volatility for Macroeconomic Management and Aid Effectiveness

This paper reviews both the literature on aid volatility and also adds to that literature. In general, the focus of this literature has been on the volatility of overall aid, while we focus more on the volatility of the individual aid sectors, e.g., education aid. In doing this, detailed use is made of the Creditor Reporting System (CRS) database on aid commitments and disbursements, particular...

The Effect of Ancestral Roots on Foreign Aid