Download or read book Using System GMM and Panel Threshold Regression to Explore the Relationship Between Foreign Aid and Economic Growth of Developing Countries written by Chala Abate and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This case study is based on research which included a panel of 44 developing countries around the world. The project examined the nature of the relationship between foreign aid and economic growth and the role that institutional quality and economic freedom play in shaping the relationship between the two. The project employed a system-generalized method of moments (GMM) and a panel threshold regression model. The 44 developing countries were selected based on the World Bank country classification as of 2019. System GMM was used because of its ability to account for the possible endogeneity problem and overcome the problem of weak instruments. The panel threshold regression model was used because it is a dynamic model, and it allows the threshold variables to be endogenous. The project results show that the relationship between foreign aid is not straight forward and is rather complicated. It is not aid per se, but the amount of aid, institutional quality, and economic freedom in the recipient country that determine the effectiveness of aid.

Download or read book Lessons on Foreign Aid and Economic Development written by Nabamita Dutta and published by Springer Nature. This book was released on 2019-09-06 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: A response to the pressing need to address and clarify the substantial ambiguity within current literature, this edited volume aims to deepen readers’ understanding of the impact of foreign aid on development outcomes based on the latest findings in research over the past decade. Foreign aid has long been seen as one of two extremes: either beneficial or damaging, a blessing or a curse. Consequently, many readers perceive aid’s effectiveness based on the work of scholars who are assessing the impact of aid from one of two antithetical perspectives. This book takes a different approach, shedding light on recent research that can deepen our understanding of the complex relationship between aid and its aftereffects. Drawing from an extensive set of studies that have explored micro and macro impacts of foreign aid for recipient nations, chapter authors highlight more layered and nuanced findings, with a focus on donor characteristics, political motives, and an evaluation of aid projects and their effectiveness, including the differential impact based on type of aid. This volume is the first of its kind to unpack aid as a complex rather than a unitary concept and explore the wide areas of grey that have long enshrouded foreign aid.

Download or read book Foreign Aid and Economic Growth written by Janine L. Bowen and published by Routledge. This book was released on 2019-05-23 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: Published in 1998, this book provides an empirical analysis of the impact of foreign economic aid in 67 developed countries over a 19 year period. The results include the relationships between aid and growth and the implication that methodologies traditionally used have been largely responsible for inconsistent findings in the past.

Download or read book Impact of Development and Humanitarian Aid on Economic Growth of Developing Countries written by S.D. Dagne and published by . This book was released on 2014 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: Official Development Assistance (ODA), commonly known as foreign aid comprises resource transfers from developed to developing countries in the form of grants and loans at concessional financial terms. Even though the primary objective of foreign aid is to promote economic development and welfare in aid recipient countries, after decades of capital transfer several studies on the relationship between foreign aid and economic growth find contradicting results. The aim of this thesis is to test the hypothesis that the impact of foreign aid on economic growth per capita may differ between humanitarian and development aid in the short and long run for aid recipient countries. To test this hypothesis, we employ panel and cross sectional regressions and used Ordinary Least Squared (OLS) as well as Two Stage Least Squared (2SLS) estimation methods for 81 aid recipient countries between the time period of 1990 and 2010. The study uses a fixed effect model and regresses humanitarian and development aid on GDP per capita growth separately to observe short and long run impacts. Under the panel OLS estimation method we find that a one percent increase in development aid increases GDP per capita growth by 1.19 percentage-points where as it reduces GDP per capita growth by 6.8 percentage-points under 2SLS estimations. However, in the long run (cross sectional regression), we find this type of aid reduces GDP per capita growth by 0.53 percentage-points under OLS and by 1.13 percent under 2SLS estimation methods. Moreover, a one percent increase in humanitarian aid increases GDP per capita growth by 0.68 percentage-points under OLS estimations in the short (panel) and 0.62 in the long run (cross sectional) regression. The major causes of the difference with other studies are discussed in terms of specification, sample size and instrument used. Given these limitations, this study may contribute to the important debate which continues to surround the aid effectiveness argument. Further research is needed in this field to provide donors and recipients in order to improve development policy.

Download or read book Aid and Growth written by Raghuram Rajan and published by International Monetary Fund. This book was released on 2005-06-01 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of aid on growth-- in cross-sectional and panel data--after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after this correction, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought. Our findings raise the question: what aspects of aid offset what ought to be the indisputable growth enhancing effects of resource transfers? Thus, our findings support efforts under way at national and international levels to understand and improve aid effectiveness.

Download or read book Foreign Aid Allocation Governance and Economic Growth written by Kamiljon T. Akramov and published by University of Pennsylvania Press. This book was released on 2012-05-22 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt: How important is foreign aid in fostering economic growth in developing countries? Does it help recipient countries, hurt them, or have little effect either way? Foreign Aid Allocation, Governance, and Economic Growth investigates this issue by looking at foreign aid by sector rather than treating it as an aggregate amount. Aid can be allocated to a recipient's production sectors (such as agriculture, manufacturing, or mining), economic infrastructure (such as transport, storage, or communications networks or power generation facilities), or social sectors (such as education or healthcare). This book differentiates among various channels through which each of these three categories of foreign aid affects economic growth. The findings suggest that economic aid, including aid to production sectors and economic infrastructure, contributes to economic growth by increasing domestic investment. Aid to social sectors, however, does not appear to have a significant impact on human capital (measured by school enrollment) and economic growth. This study also assesses the degree to which the quality of democratic governance in a recipient country influences foreign aid's effectiveness and finds that democracy is no guarantee of aid effectiveness. In fact, economic aid to less democratic countries can lead to better economic growth, at least initially, provided the aid recipients secure property rights and allow capital accumulation. Although further research into the question is necessary, Foreign Aid Allocation, Governance, and Economic Growth suggests that aid targeted to increasing domestic investment might be an effective means of fostering economic growth in less developed countries.

Download or read book The Effect of Foreign Aid on Economic Growth in Developing Countries written by Semere Tesfamariam Kahsay and published by . This book was released on 2020-03-06 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Development Thresholds of Foreign Aid Effectiveness in Africa written by Simplice Asongu and published by . This book was released on 2015 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - This paper examines whether initial levels in GDP growth, GDP per capita growth and inequality adjusted human development matter in the impact of aid on development. In substance its object is to assess if threshold development conditions are necessary for the effectiveness of foreign aid in Africa. Design/Methodology/Approach - The panel quantile regression technique enables us to investigate if the relationship between development dynamics and development assistance differs throughout the distributions of development dynamics.Findings - Three main findings are established. (1) With slight exceptions, the effectiveness of aid in economic prosperity (at the macro level) increases in positive magnitude across the distribution. This implies high-growth countries are more likely to benefit from development assistance (in terms of general economic growth) than their low-growth counterparts. (2) The positive nexus between aid and per capita economic growth displays nonlinear patterns across distributions and specifications, with the correlations broadly higher in top quantiles than in bottom quantiles after controlling for the unobserved heterogeneity. (3) The aid-human development nexus is negative and almost similar in magnitude across distributions and specifications.Practical Implications - As a policy implication, there is need to improve management of aid funds destined for health and education projects in the sampled countries. Moreover, given the magnitude of the nexuses, while blanket aid initiatives could be applied for policies targeting the HDI (due to the absence of significant differences in the magnitude of estimated coefficients), such are unlikely to succeed for aid targeting economic prosperity at macro and micro levels. From the weight of the findings, given a policy of balancing the impact of aid, it could be inferred that low-growth countries would need more aid than their high-growth counterparts because of the less positive effects in the former countries. Originality/Value - This paper contributes to existing literature on the effectiveness of foreign aid by focusing on the distribution of the dependent variables (development dynamics). It is likely that high- and low-growth countries respond differently to development assistance.

Download or read book Foreign Aid and Development written by Finn Tarp and published by Routledge. This book was released on 2000-08-17 with total page 522 pages. Available in PDF, EPUB and Kindle. Book excerpt: Peter Hjertholm, Editorial Assistant Aid has worked in the past but can be made to work better in the future. In this important new book, leading economists and political scientists, including experienced aid practitioners, re-examine foreign aid. The evolution of development doctrine over the past fifty years is critically investigated, and conven

Download or read book Development Aid to Agriculture and Economic Growth written by Ozgur Kaya and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The link between foreign aid and economic growth has been a controversial issue with no strong consensus so far. This paper argues that a possible reason why some studies may conclude that aid is ineffective in promoting economic growth might be that not all aid is given for development purposes (i.e. aid given for strategic considerations, humanitarian reasons or emergency relief). This study classifies foreign aid into four subcategories: agricultural aid, social infrastructure aid, investment aid, and non-investment aid. Using the generalized method of moments (GMM) estimation technique on a Barro type growth regression with panel data from the aid recipient economies, this paper finds that when aid is directed to the agricultural sector of the developing countries, it is positively and significantly related to growth and can affect economic growth in the short run.

Download or read book Nonlinearity Between the Shadow Economy and Level of Development written by Dong Frank Wu and published by International Monetary Fund. This book was released on 2019-03-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is the first attempt to directly explore the long-run nonlinear relationship between the shadow economy and level of development. Using a dataset of 158 countries over the period from 1996 to 2015, our results reveal a robust U-shaped relationship between the shadow economy size and GDP per capita. Our results imply that the shadow economy tends to increase when economic development surpasses a given threshold or at least does not disappear. Our findings suggest that special attention should be given to the country’s level of development when designing policies to tackle issues related to the shadow economy.

Download or read book The Effect of Foreign Aid on Sub national Development written by Dumebi Ochem and published by Graduate Institute Publications. This book was released on 2020-09-07 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This ePaper investigates the non-linear effects of geo-referenced World Bank aid projects on economic development at the sub-national level, measured as night-time luminosity. The data framework is based on a grid cell structure at a 0.5 x 0.5 decimal degree resolution, covering approximately 10,600 grid cells across 54 African countries, over the period of 1992 to 2014. This approach addresses endogeneity concerns associated with sample selection and reverse causality. Using a fixed effects quantile regression approach, I estimate the impact of foreign aid at distinct levels of development within countries. Overall, the results suggest a positive and statistically significant effect of aid on night-time luminosity, with the largest impact observed within relatively poorer grid cells. In addition, there is evidence of spill-over aid effects from neighbouring grid cells. These findings are however sensitive to different model specifications and variable transformations. We extend our heartfelt thanks to the Vahabzadeh Foundation for financially supporting the publication of best works by young researchers of the Graduate Institute, giving a priority to those who have been awarded academic prizes for their master’s dissertations.

Download or read book The Other War written by Lael Brainard and published by Rowman & Littlefield. This book was released on 2004-05-13 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and the Center for Global Development publication The plight of the poorest around the world has been pushed to the forefront of America's international agenda for the first time in many years by the war on terrorism and the formidable challenges presented by the HIV/AIDS pandemic. In March 2002, President Bush announced the creation of the Millennium Challenge Account (MCA). This bilateral development fund represents an increase of $5 billion per year over current assistance levels and establishes of a new agency to promote growth in reform-oriented developing countries. Amounting to a doubling of U.S. bilateral development aid—the largest increase in decades—the MCA offers a critical chance to deliberately shape the face that the United States presents to people in poor nations around the world. This book makes concrete recommendations on crafting a new blueprint for distributing and delivering aid to make the MCA an effective tool, not only in its own right, but also in transforming U.S. foreign aid and strengthening international aid cooperation more generally. The book tackles head on the tension between foreign policy and development goals that chronically afflicts U.S. foreign assistance; the danger of being dismissed as one more instance of the United States going it alone instead of buttressing international cooperation; and the risk of exacerbating confusion among the myriad overlapping U.S. policies, agencies, and programs targeted at developing nations, particularly USAID. In doing so, The Other War draws important lessons from new international development initiatives, such as the Global Fund to Fight AIDS, TB, and Malaria, the mixed record of previous U.S. aid efforts, trends in the U.S. budget for foreign assistance, the agencies currently involved in administering U.S. development policy, and the importance of the relationship between Congress and the executive branch in determining aid outcomes. The MCA holds the promise of substantially increasing U.S. development assistance and piolicy, and the importance of the relationship between Congress and the executive branch in determining aid outcomes. The MCA holds the promise of substantially increasing U.S. development assistance and pioneering a new era in aid, but the authors caution against creating yet another example of wasted aid that could undermine political support for foreign assistance for decades to come.

Download or read book Foreign Aid in the Age of Populism written by Viktor Jakupec and published by Routledge. This book was released on 2019-02-07 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: Across the world the Western dominated international aid system is being challenged. The rise of right-wing populism, de-globalisation, the advance of illiberal democracy and the emergence of non-Western donors onto the international stage are cutting right to the heart of the entrenched neoliberal aid paradigm. Foreign Aid in the Age of Populism explores the impact of these challenges on development aid, arguing that there is a need to bring politics back into development aid; not just the politics of economics, but power relations internally in aid organisations, in recipient nations, and between donor and recipient. In particular, the book examines how aid agencies are using Political Economy Analysis (PEA) to inform their decision making and to push aid projects through, whilst failing to engage meaningfully with wider politics. The book provides an in-depth critical analysis of the Washington Consensus model of political economy analysis, contrasting it with the emerging Beijing Consensus, and suggesting that PEA has to be recast in order to accommodate new and emerging paradigms. A range of alternative theoretical frameworks are suggested, demonstrating how PEA could be used to provide a deeper and richer understanding of development aid interventions, and their impact and effectiveness. This book is perfect for students and researchers of development, global politics and international relations, as well as also being useful for practitioners and policy makers within government, development aid organisations, and global institutions.

Download or read book Foreign Aid s Impact on Public Spending written by Tarhan Feyzioglu and published by World Bank Publications. This book was released on 1999 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: May 1996 Using a model of aid fungibility, the authors examine the relationship between foreign aid and public spending. Based on a panel of cross-country and time-series data, their results show that roughly 75 cents of every dollar given in net development assistance goes to current spending and 25 cents to capital spending in the recipient countries. But concessionary loans - a component of development assistance - stimulate far more government spending. Their results also show that aid increases both public and private investment. To test aid fungibility across both public spending categories, they use a newly constructed data series on the net disbursement of concessionary loans. They find that concessionary loans given to the transport and communication sector are fully nonfungible. But loans to the energy sector are converted into fungible monies and part of the funds leak into transport and communications. Loans to agriculture and education are also fungible. There is no evidence of concessionary funds being diverted for military purposes. Their results show that total public spending in the health sector has no impact on reducing infant mortality, but concessionary loans to the health sector do. This finding leads the authors to conclude that linking foreign aid to an agreed-upon public spending program in areas critical to development might be an effective way to transfer resources to developing countries.

Download or read book The Development Record and the Effectiveness of Foreign Aid written by Michael J. Crosswell and published by . This book was released on 1998 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The development record; Where do we stand now? What the prospects for continued progress? Has U.S. foreign aid 'gone down ratholes'?

Download or read book Measuring the Effect of Foreign Aidon Growth and Poverty Reduction Or the Pitfalls of Interaction Variables written by Catherine A. Pattillo and published by International Monetary Fund. This book was released on 2007-06 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regressions in a number of recent papers written by staff members of the World Bank and the IMF rely on an interaction variable (IAV) to establish the effects of foreign aid on economic growth or the reduction of poverty. The common assumption in these papers is that if the coefficient of this IAV is statistically significant, then both of its components have a significant effect on the dependent variable. That assumption is not justified in its generality, and this paper develops two techniques that show a high probability that in at least two of the three studies analyzed one of the components of the IAV may not have a significant effect.