Should we expect aid to increase economic growth?

Howard White

Research output: Working paperAcademic

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Abstract

The orthodox view of aid's impact on growth sees aid as relieving either a savings or a foreign exchange constraint and so directly increasing growth through higher investment. However, empirical studies have found little evidence of such a relationship: there has hence been some pessimism about aid's ability to increase growth. It is argued here that these findings are not surprising, given both our uncertainty about the determinants of growth and aid's changing nature. It is better to concentrate analysis on aid's impact on variables that are important to the growth process. Attempts to do this in the case of savings have been flawed by their partial framework. The simultaneous macroeconometric model presented here for Sri Lanka shows aid has in fact had a very strong impact on investment and output.
Original languageEnglish
Place of PublicationDen Haag
PublisherInternational Institute of Social Studies (ISS)
Number of pages32
Publication statusPublished - Jan 1992
Externally publishedYes

Publication series

SeriesISS working papers. General series
Number127
ISSN0921-0210

Series

  • ISS Working Paper-General Series

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