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Growth effect of aid and its volatility: An individual country study in South Asian economies

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  • Vesna Bucevska

    (Faculty of Economics-Skopje University of Ss. Cyril and Methodius, Macedonia)

Abstract

The objective of this paper is to estimate the relative contribution of a wide array of determinants to outbreak of financial crises in the EU candidate countries (Croatia, Macedonia and Turkey) and to identify the best-performing early warning indicators of financial crises. We have estimated a binomial logit model of the three EU candidate countries for the period 2005Q1 to 2009Q4 using actual quarterly data. It has been found that the capital account indicators (gross external debt relative to export) and the financial sector variables (the domestic loans and the total bank deposits in relation to GDP) have the highest contribution of all early warning indicators, which is in line with the previous studies of financial shocks in emerging markets. The obtained empirical results give support to the thesis that financial crises in the EU candidate countries can not be solely explained and predicted by only one group of variables, but by a number of different types of indicators. Based on our empirical findings, the EU candidate countries are strongly suggested to decrease their stock of external debt to GNP and to continually analyze and close monitor the financial deepening processes in their countries.

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  • Vesna Bucevska, 2011. "Growth effect of aid and its volatility: An individual country study in South Asian economies," Business and Economic Horizons (BEH), Prague Development Center, vol. 4(1), pages 13-26, January.
    • Handle: RePEc:pdc:jrnbeh:v:4:y:2011:i:1:p:13-26
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    More about this item

    Keywords

    Financial crisis; early warning system model; logit model; the EU candidate countries.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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