Macroeconomic impact of foreign aid to developing countries

This thesis is specially concerned with aid's impact on the public sector of less developed countries and econometrically estimates "fiscal response" models of aid. A number of alternative models are derived from a utility maximisation framework. Results suggest that aid leads to increases in investment and consumption expenditure, but reduces taxation and domestic borrowing. Comparative analysis does, however, show that these results are highly sensitive to alternative behavioural assumptions and, therefore, model specification.