Our aim is to explore the role of financial aid in a default episode. To that end, we develop a dynamic stochastic quantitative model of sovereign default featuring fiscal policy, endogenous financial aid and risk-averse foreign lenders. After calibrating the model, we feed output shocks into...

We develop a dynamic stochastic quantitative model of sovereign default featuring fiscal policy, endogenous financial aid and risk-averse foreign lenders, in order to explore the role of financial aid in a default episode. After calibrating the model, we feed output shocks into the model to show...

This paper uses the cointegrated vector autoregressive (CVAR) model to assess the dynamic relationship between foreign aid inflows, public expenditure, revenue and domestic borrowing in Ethiopia. It departs from the existing literature by using a unique quarterly fiscal dataset (1993-2008) and...