Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103080
Authors: 
Temple, Jonathan
Van de Sijpe, Nicolas
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5029
Abstract: 
We introduce a new supply-push' instrument for foreign aid, to be used together with an instrumental variable estimator that filters out unobserved common factors. We use this instrument to study the effects of aid on macroeconomic ratios, and especially the ratios of consumption, investment, imports and exports to GDP. We cannot reject the hypothesis that aid is fully absorbed rather than used to build foreign reserves or exiting as capital flight, nor do we find evidence of Dutch Disease effects. Aid leads to higher consumption, while the evidence that it promotes investment is less robust.
Subjects: 
foreign aid
absorption
Dutch Disease
JEL: 
F35
Document Type: 
Working Paper

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