What does aid do to fiscal policy? : new evidence /

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Bibliographic Details
Author / Creator:	Combes, Jean-Louis, 1965- author, (IMF staff)
Imprint:	[Washington, D.C.] : International Monetary Fund, [2016] ©2016
Description:	1 online resource (32 pages) : color illustrations.
Language:	English
Series:	IMF working paper, 1018-5941 ; WP/16/112 IMF working paper ; WP/16/112.
Subject:	Economic assistance -- Developing countries. Fiscal policy -- Developing countries. Structural adjustment (Economic policy) -- Developing countries. Economic assistance. Fiscal policy. Structural adjustment (Economic policy) Developing countries.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12506732

Hidden Bibliographic Details
Other authors / contributors:	Ouedraogo, Rasmane, author, (IMF staff) Tapsoba, Sampawende J.-A. (Sampawende Jules-Armand), author, (IMF staff) International Monetary Fund, publisher. International Monetary Fund. Fiscal Affairs Department, sponsor.
ISBN:	9781475540413 1475540418 9781484382691 1484382692
ISSN:	1018-5941
Digital file characteristics:	data file
Notes:	"June 2016." "Fiscal Affairs Department." Includes bibliographical references (pages 29-32). Online resource; title from pdf title page (IMF.org Web site, viewed August 9, 2016).
Summary:	Foreign aid is a sizable source of government financing for several developing countries and its allocation matters for the conduct of fiscal policy. This paper revisits fiscal effects of shifts in aid dependency in 59 developing countries from 1960 to 2010. It identifies structural shifts in aid dependency: upward shifts (structural increases in aid inflows) and downward shifts (structural decreases in aid inflows). These shifts are treated as shocks in aid dependency and treatment effect methods are used to assess the fiscal effects of aid. It finds that shifts in aid dependency are frequent and have significant fiscal effects. In addition to traditional evidence of tax displacement and "aid illusion," we show that upward shifts and downward shifts in aid dependency have asymmetric effects on the fiscal accounts. Large aid inflows undermine tax capacity and public investment while large reductions in aid inflows tend to keep recipients' tax and expenditure ratios unchanged. Moreover, the tax displacement effects tend to be temporary while the impact on expenditure items are persistent. Finally, we find that the undesirable fiscal effects of aid are more pronounced in countries with low governance scores and low absorptive capacity, as well as those with IMF-supported programs.
Other form:	Print Version: Combes, Jean-Louis. What Does Aid Do to Fiscal Policy? New Evidence. Washington, D.C. : International Monetary Fund,2016 9781484382691
Standard no.:	10.5089/9781484382691.001

Table of Contents:

Cover; Contents; Abstract; I. Introduction; II. Overview of the Literature; III. Econometric Strategy; A. Shifts in Aid Dependency: A Structural Shift Approach; B. Propensity Score Matching Approach; C. Selection Model: Estimating the Propensity Scores; IV. Dataset; V. Results; A. Determinants of Aid Shifts; B. Effects of Aid Shifts; C. Non-linear Effects of Aid Shifts; D. Time-varying Effects of Aid Shifts; VI. Robustness Checks; VII. Conclusion; References; Tables; Table 1. Determinants of Aid Shifts; Table 2. Effects of Aid Shift.
Table 3. Effects of Shifts in Aid Dependency on Revenue ItemsTable 4. IMF-supported Programs and Tax Displacement; Table 5. Role of Quality of Governance and Absorptive Capacity and Fiscal Effects of Aid; Table 6. Time-varying Effects of Aid Shifts; Table 7. Robustness Checks: Fiscal Effects of Aid Shifts; Figures; 1. Representation of Possible Shifts in Aid Dependency; 2. Shifts in Aid Dependency in Central African Republic and Nepal, Aid-to-GDP (percent), 1960-2010; 3. Overview of Shifts in Aid Dependency, Numbers of Shifts, 1960-2010; Appendices; A1. Distribution of Aid Shifts by Country.
A2. Descriptive StatisticsA3. Components of the Index of Absorptive Capacity; A4. The Propensity Scores Matching (PSM) Method; A5. Balance Tests.

What does aid do to fiscal policy? : new evidence /

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