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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Aid, Debt Burden and Government Fiscal Behaviour in Cote d'Ivoire
Authors:McGillivray, Mark
Ouattara, Bazoumana
Year:2005
Periodical:Journal of African Economies
Volume:14
Issue:2
Period:June
Pages:247-269
Language:English
Geographic term:Ivory Coast - Côte d'Ivoire
Subjects:financial aid
fiscal policy
debt repayment
financial policy
public finance
Politics and Government
Economics and Trade
international relations
Link:http://jae.oxfordjournals.org/content/14/2/247.full.pdf
Abstract:One area of the wider aid effectiveness debate has attempted to look at how foreign aid inflows affect recipient government fiscal behaviour. Fiscal response studies look beyond aid's impact on expenditure types to also examine how other sources of revenue (tax and borrowing) are affected by these inflows. This paper contributes to the fiscal response literature in three ways. First, it develops a variant of the fiscal response model suitable for analysing interactions between aid and government fiscal aggregates in highly indebted countries, in which debt servicing is a dominant component of recurrent expenditure. Second, in a further departure from previous research, the model's parameters are estimated in a way that ensures that all estimates are consistent with the theoretical model. Third, the paper provides the first application of a fiscal response model to time series data for Côte d'Ivoire. The time period is 1975-1999. Three key findings emerge from the paper. The first is that the majority of foreign aid is allocated to public debt servicing rather than other areas of government expenditure. The second key finding is that aid inflows are positively associated with the level of public debt in Côte d'Ivoire; this conflicts with conventional wisdom that aid and debt are substitutes. Third, aid is negatively associated with tax and other recurrent revenues. Overall, the results reported in this paper paint a rather negative picture of aid's impact on fiscal aggregates in Côte d'Ivoire. Bibliogr., notes, ref., sum. [ASC Leiden abstract]
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