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1. Aid, Debt Burden and Government Fiscal Behaviour: A New Model Applied to Côte d'Ivoire

Author:
Mark McGillivray and Bazoumana Ouattara
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines the impact of foreign aid on public sector fiscal behaviour in Côte d'Ivoire. A special interest is the relationship between aid, debt servicing and debt, given that Côte d'Ivoire is a highly indebted country. The theoretical model employed differs from those of previous studies by highlighting the interaction between debt servicing and the other fiscal variables. This model is estimated using 1975–99 time series data. Key findings are that the bulk of aid is allocated to debt servicing and that aid is associated with increases in the level of public debt.
Topic:
Debt, Development, Economics, and International Trade and Finance
Political Geography:
Africa

2. Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from Côte d'Ivoire

Author:
George Mavrotas and Bazoumana Ouattara
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The present paper examines the impact of different aid types, namely project aid, programme aid, technical assistance and food aid on the fiscal sector of the aid-recipient economy by using time-series data for Côte d'Ivoire over the period 1975–99. Empirical results obtained by estimating correctly the solution of the theoretical model show that when a single value (or aggregated) for aid is used, foreign aid is fully consumed in the case of Côte d'Ivoire. However, results obtained under the assumption of aid heterogeneity clearly suggest that the government responds differently according to the nature of the aid inflows. Our approach sheds plenty of light on how the aid-recipient government reacts to different categories of foreign aid inflows and the empirical findings clearly demonstrate the importance of the aid disaggregation approach for delving deeper into aid effectiveness issues.
Topic:
Development, Economics, Emerging Markets, and Non-Governmental Organization
Political Geography:
Africa

3. The Composition of Aid and the Fiscal Sector in an Aid-Recipient Economy: A Model

Author:
George Mavrotas and Bazoumana Ouattara
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Building on recent work in the fiscal response literature, the present paper develops a new fiscal response model, which, for the first time in the relevant literature, combines the ideas of both endogenous and disaggregated aid. We endogenized aid on the grounds that the recipient government has some influence over aid disbursements. Regarding aid disaggregation, it is argued that each of the main four categories of aid, namely project aid, programme aid, technical assistance and food aid may exert different effects on the recipient economy. Furthermore, in case the preferences of the aid-recipient government are higher for some of these types of aid, neglecting aid disaggregation would lead to aggregation bias in the results and conclusions. The model adds an important new dimension to the vast aid effectiveness literature and calls for further modelling as well as empirical work in this promising research area so that significant policy implications can be derived.
Topic:
Development, Economics, Emerging Markets, Non-Governmental Organization, and Poverty