Local Financial Development and the Aid-Growth Relationship

34 Pages Posted: 9 Feb 2006

See all articles by Mwanza Nkusu

Mwanza Nkusu

International Monetary Fund (IMF)

Selin Sayek

Bilkent University - Department of Economics; International Monetary Fund (IMF)

Date Written: December 2004

Abstract

With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis.

Keywords: Foreign aid, economic growth, poverty, financial development

JEL Classification: F35, I30, O40, O50

Suggested Citation

Nkusu, Mwanza and Sayek, Selin, Local Financial Development and the Aid-Growth Relationship (December 2004). IMF Working Paper No. 04/238, Available at SSRN: https://ssrn.com/abstract=879063

Mwanza Nkusu (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Selin Sayek

Bilkent University - Department of Economics ( email )

06533 Ankara
Turkey
+90 312 290 1406 (Phone)

HOME PAGE: http://www.bilkent.edu.tr/~sayek/

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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