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

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThe 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-run aid effectiveness. The analysis is carried out in two stages. First, I apply the same models as developed by JMT to the new datasets. Second, I re-specify the Cointegrated VAR models using the same criteria as JMT, but limit the analysis to the four most and least consistent countries respectively. The first exercise shows that results change in a significant manner in approximately 10 of the 36 countries examined. The second exercise shows that the if the models are re-specified for each country and dataset individually as a function of the data, this leads to more qualitative changes in the conclusions.JEL Classification: C32, F35, O11, O47

Aid, taxes, and government spending: A heterogeneous co-integrated panel analysis

“…That is, no structural relationship between aid and variables is imposed. Second, the time series dimension of the data is fully explored, permitting a distinction between short-run (adjustments to equilibrium) and long-run (equilibrium) relationships between macroeconomic aggregates (Roger, 2015). While FRMs consider the broader relationship between domestic fiscal variables and aid they do not, however, estimate the magnitude of aid on government spending.…”

“…Second, as Roger (2015) emphasises, these cross-country estimates are based on the stringent homogeneity assumption, that the effects of aid on government spending are the same for all countries in the respective samples. Homogeneity imposes the coefficients determining how aid impacts on government spending, the data generating process (DGP hereafter), to be the same across countries.…”