Aid, economic reform, and public sector fiscal behaviour in developing countries

McGillivray, Mark 2009, Aid, economic reform, and public sector fiscal behaviour in developing countries, Review of development economics, vol. 13, no. 3, Special Issue. Development Aid : Theory, Policies and Performance., pp. 526-542, doi: 10.1111/j.1467-9361.2009.00505.x.

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Title Aid, economic reform, and public sector fiscal behaviour in developing countries
Author(s) McGillivray, MarkORCID iD for McGillivray, Mark
Journal name Review of development economics
Volume number 13
Issue number 3
Season Special Issue. Development Aid : Theory, Policies and Performance.
Start page 526
End page 542
Total pages 17
Publisher Wiley-Blackwell Publishing Ltd.
Place of publication Oxford, England
Publication date 2009-08
ISSN 1363-6669
Summary This paper looks at interactions between foreign development aid, economic reform, and public sector fiscal behavior. It proposes a model of the public sector fiscal response to aid inflows, which allows for changes in structural relationships due to an exogenously imposed program of economic reform. This model is applied to 1960–99 time series data for the Philippines, which embarked on an IMF- and World Bank-funded structural adjustment program in 1980. Estimates of structural and reduced-form equations paint a dismal picture of the effectiveness of foreign aid to, and the structural adjustment program in, the Philippines so far as fiscal impacts are concerned. Both bilateral and multilateral aid inflows, and the presence of an economic reform program, are associated with decreases in public fixed capital expenditure, decreases in taxation and other recurrent revenue, and decreases in public sector saving. Multilateral aid also appears to be highly fungible.
Notes Published Online: 12 Mar 2009
Language eng
DOI 10.1111/j.1467-9361.2009.00505.x
Field of Research 140219 Welfare Economics
Socio Economic Objective 910209 Preference, Behaviour and Welfare
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2009, UNU-WIDER
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