We use a heterogeneous panel VAR model identified through factor analysis to study the dynamic response of exports, imports, and per capita GDP growth to a “global” aid shock. We find that a global aid shock can affect exports, imports, and growth either positively or negatively. As a...

The available evidence on the effects of aid on growth is notoriously mixed. We use a novel empirical methodology, a heterogeneous panel vector-autoregression model identified through factor analysis, to study the dynamic response of exports, imports, and per capita GDP growth to a global aid...

This paper evaluates the bias of the least-squares-with-dummy-variables (LSDV) method in fiscal reaction function estimations. A growing number of studies estimate fiscal policy reaction functions-that is, relationships between the primary fiscal balance and its determinants, including public...