Local Financial Development and the Aid-Growth Relationship, Issues 2004-2238
With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Results and Interpretation
1 other sections not shown
Other editions - View all
0.000 Institutional quality aid flows aid on growth aid-squared Alternative Financial Market Capita GDP Alternative chi-squared test statistics coefficient control variables countries 46 46 deeper financial markets Dependent Variable Depth Measures LLY economic growth effects of aid enhance aid effectiveness financial development financial intermediation financial market depth financial market development Financial Markets Channel fixed effects GDP Alternative Financial Government consumption gross national income Growth Effects Growth of Real Human capital hypothesis impact of aid impact on growth included Initial GDP instrumental variables interest rate Joint significance tests liquid liabilities LLY PSC BANKCR macroeconomic market depth indicator Market Depth Measures Measures LLY PSC measures of financial median observations 179 official development assistance p-values percent of GDP period positive and significant positive impact private sector credit real exchange rate Real Per Capita results in column share of GDP sterilization Table 4a Terms of trade World Bank World Development Indicators WTSLS