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Does Foreign Aid Play a Role in the Maintenance of Economic Growth? A Non-linear Analysis

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journal contribution
posted on 25.03.2020, 17:13 by Nermeen Harb, Stephen Hall
Should donors keep scaling up foreign aid or should they be more cautious because of the recipient country’s limited absorptive capacity? This paper investigates the non-linearity hypothesis between foreign aid and economic growth for 25 developing countries during the period from 1984 to 2008. By using state space system equations, we provide a new insight to estimating the Panel Smooth Transition Regression Model (PSTR). This method identifies the estimated coefficients at each point of time and determines endogenously an appropriate threshold level. For upper middle countries, we recognise the positive impact of aid flows on economic growth but with diminishing returns while lower middle and least developed countries support the big push concept.

History

Citation

The Quarterly Review of Economics and Finance, 73 (2019), 192–204

Author affiliation

Department of Economics

Version

AM (Accepted Manuscript)

Published in

Quarterly Review of Economics and Finance

Volume

73

Pagination

192–204

Publisher

Elsevier

issn

1062-9769

Acceptance date

08/12/2018

Copyright date

2019

Available date

03/01/2019

Publisher version

https://www.sciencedirect.com/science/article/pii/S1062976917302375

Language

en

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