An important feature of aid to developing countries is that it is given to the government. As a result, aid should be expected to affect fiscal behaviour. Traditional approaches to modelling fiscal effects are beset by theoretical and empirical problems. This paper applies techniques developed...

It is common practice in empirical development macroeconomics to use cross-country samples for econometric analyses. One issue that is rarely addressed in this literature is the appropriateness of pooling when panels are used. In particular, does it matter to the results if the countries exhibit...

Aid has been the principal source of development finance for the majority of developing countries over the past few decades. This has spawned a large literature on the effectiveness of aid, which remains essentially inconclusive. The empirical literature has tended to evaluate the impact of aid...

A number of recent cross-country studies have revitalised the debate on the effectiveness of aid. While there is mounting evidence that aid does contribute to growth, there is some dispute as to whether good policy is a necessary condition for aid effectiveness. This paper is a contribution to...

This paper takes a fresh look at three issues in the aid effectiveness debate. First, we assess the theoretical case for foreign aid. Using an endogenous growth version of the standard overlapping generations model, we show that aid can be an effective policy tool in spurring growth in poor...

Two findings have been common in the literature on the impact of foreign aid on public sector fiscal behaviour in developing countries. The first is that aid "sticks" to higher levels of recipient government expenditure, with aggregate expenditure often rising by more than the value of the aid...