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Foreign Aid And Domestic Savings: The Crowding Out Effect

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  • Michael P. Shields

Abstract

The paper examines the relationship between foreign aid and savings using annual data for 119 countries. Regressions for each country are run separately in order to find which countries have a positive aid-saving experience. The explanatory variables chosen are thought to be exogenous to current economic policy. Countries are placed into five categories according to the strength of the aid-saving relationship. Few countries show evidence of substantial crowding out. Consequently, aid is found to be clearly beneficial to saving and, hence, investment for the preponderance of these countries.

Suggested Citation

  • Michael P. Shields, 2007. "Foreign Aid And Domestic Savings: The Crowding Out Effect," Monash Economics Working Papers 35-07, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2007-35
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2007/3507foreignaid.pdf
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    References listed on IDEAS

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    Cited by:

    1. Workneh, Migbaru Alamirew & Francken, Nathalie, 2015. "A review of the impact of foreign aid on domestic saving," MPRA Paper 92174, University Library of Munich, Germany, revised 13 Feb 2019.
    2. Workneh, Migbaru Alamirew, 2018. "Poverty and unemployment in Spain during the 2008's financial crises," MPRA Paper 92145, University Library of Munich, Germany.
    3. Ruerd Ruben, 2012. "Dimensionner l'aide au développement : ce que nous enseigne l'évaluation. Dimensioning Development Aid: Some Lessons from Evaluation," Revue d’économie du développement, De Boeck Université, vol. 20(4), pages 95-123.
    4. Yahyaoui, Ismahen & Bouchoucha, Najeh, 2019. "The Long-run relationship between ODA, growth and governance: An application of FMOLS and DOLS Approachs," MPRA Paper 95938, University Library of Munich, Germany.
    5. Workneh, Migbaru Alamirew, 2013. "Impact of foreign aid on domestic saving (case study in Ethiopia)," MPRA Paper 92577, University Library of Munich, Germany, revised 06 Mar 2019.

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