Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63539
Authors: 
Hansen, Henrik
Headey, Derek
Year of Publication: 
2007
Series/Report no.: 
Research Paper, UNU-WIDER, United Nations University (UNU) 2007/38
Abstract: 
This study econometrically evaluates the short-run impact of aid in small developing countries (SDCs) by applying a VAR model to study aid's impact on 'absorption' (increasing import demand) and 'spending' (increased domestic demand) across countries. Whilst our approach allows parameters to vary across countries, the focus is on average country effects and differential effects within certain subgroups of countries. In particular, we find substantial differences between 'aid-dependent' SDCs and other SDCs which are more dependent on mineral resources and financial services. In the latter group, aid seems to be neither absorbed nor spent in any systematic fashion. But in the aid-dependent SDCs, aid receipts seem to be used more in the textbook 'absorb and spend' fashion.
Subjects: 
foreign aid
small developing countries
macroeconomic adjustment
absorption
spending
VAR models
panel data
JEL: 
O11
O23
C53
ISBN: 
9291909815=978-92-9190-981-0
Document Type: 
Working Paper

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