This paper studies the macroeconomic effects of a permanent increase in foreign aid in a model that takes into account environmental quality. We develop a dynamic equilibrium model in which both public investment in infrastructure and environmental protection can be financed using domestic...

Previous research has shown a strong positive correlation between short-term persistence and long-term output growth as well as between depreciation rates and long-term output growth. This evidence, therefore, contradicts the standard predictions from traditional neoclassical or AK-type growth...