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Foreign aid and the public sector : a simulation approach

Author

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  • Gupta, Kanhaya L.
  • Lensink, Robert

    (Groningen University)

Abstract

The paper considers a (static) portfolio system that satisfies adding-up contraints and the gross substitution theorem. The paper shows the relationship of the two conditions to the weak dominant diagonal property of the matrix of interest rate elasticities. This enables to investigate the impact of simultaneous changes in interest rates on the asset demands.

Suggested Citation

  • Gupta, Kanhaya L. & Lensink, Robert, 1995. "Foreign aid and the public sector : a simulation approach," Research Report 95D21, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:95d21
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    File URL: http://irs.ub.rug.nl/ppn/143813420
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    References listed on IDEAS

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    1. Purvis, Douglas D, 1978. "Dynamic Models of Portfolio Behavior: More on Pitfalls in Financial Model Building," American Economic Review, American Economic Association, vol. 68(3), pages 403-409, June.
    2. Pack, Howard & Pack, Janet Rothenberg, 1990. "Is Foreign Aid Fungible? The Case of Indonesia," Economic Journal, Royal Economic Society, vol. 100(399), pages 188-194, March.
    3. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    4. Owen, P Dorian, 1981. "Dynamic Models of Portfolio Behavior: A General Integrated Model Incorporating Sequencing Effects [Dynamic Models of Portfolio Behavior: More on Pitfalls in Financial Model Building]," American Economic Review, American Economic Association, vol. 71(1), pages 231-238, March.
    5. Howard White, 1993. "Aid and government: A dynamic model of aid, income and fiscal behaviour," Journal of International Development, John Wiley & Sons, Ltd., vol. 5(3), pages 305-312, May.
    6. White, Howard & Luttik, Joke & DEC, 1994. "The countrywide effects of aid," Policy Research Working Paper Series 1337, The World Bank.
    7. Pack, Howard & Pack, Janet Rothenberg, 1993. "Foreign Aid and the Question of Fungibility," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 258-265, May.
    8. White, Howard, 1994. "Foreign aid, taxes and public investment: A further comment," Journal of Development Economics, Elsevier, vol. 45(1), pages 155-163, October.
    9. Morisset, Jacques, 1993. "Does financial liberalization really improve private investment in developing countries?," Journal of Development Economics, Elsevier, vol. 40(1), pages 133-150, February.
    10. Smith, Gary, 1978. "Dynamic Models of Portfolio Behavior: Comment on Purvis," American Economic Review, American Economic Association, vol. 68(3), pages 410-416, June.
    11. Christopher A. Pissarides, 1978. "Liquidity Considerations in the Theory of Consumption," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(2), pages 279-296.
    12. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-445, June.
    13. Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November.
    14. Agenor, Pierre-Richard & Haque, Nadeem U. & Montiel, Peter J., 1993. "Macroeconomic effects of anticipated devaluations with informal financial markets," Journal of Development Economics, Elsevier, vol. 42(1), pages 133-153, October.
    15. Khan, Haider Ali & Hoshino, Eiichi, 1992. "Impact of foreign aid on the fiscal behavior of LDC governments," World Development, Elsevier, vol. 20(10), pages 1481-1488, October.
    16. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
    17. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
    18. Gang, Ira N. & Khan, Haider Ali, 1994. "Reply to White, 'foreign aid, taxes and public investment: A further comment'," Journal of Development Economics, Elsevier, vol. 45(1), pages 165-167, October.
    19. Ogawa Kazuo & Saito Mitsuo & Tokutsu Ichiro, 1994. "The Flow-of-Funds Equations of Japanese Nonfinancial Firms," Journal of the Japanese and International Economies, Elsevier, vol. 8(1), pages 72-105, March.
    20. Binh, Tran-Nam & McGillivray, Mark, 1993. "Foreign aid, taxes and public investment A comment," Journal of Development Economics, Elsevier, vol. 41(1), pages 173-176, June.
    21. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
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    Cited by:

    1. Zafar Iqbal, 1997. "Foreign Aid and the Public Sector: A Model of Fiscal Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(2), pages 115-129.

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