The impact of aid on total government expenditures: New evidence on fungibility

Łukasz Marć

No wp-2015-010, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Aid is said to be fungible at the aggregate level if it raises government expenditures by less than the total amount. This happens when the recipient government decreases domestic revenue, decreases net borrowing, or when aid bypasses the budget. This study makes three contributions to both fungibility and fiscal response literature. First, fungibility at the aggregate level is re-examined on a bigger recent panel dataset, distinguishing between short- and long-term impact of aid. The results indicate that aid is partly fungible in the long run and highly fungible in the short run.

Keywords: Economic assistance and foreign aid; Econometric models (Economic development); Public expenditures; Fiscal policy; Panel analysis (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:unu:wpaper:wp-2015-010

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