{
  "title": "Where Did All the Aid Go? An Empirical Analysis of Absorption and Spending",
  "publication": "IMF Working Papers, February 1, 2008",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/where-did-all-the-aid-go-an-empirical-analysis-of-absorption-and-spending-21605",
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  "summary": "This paper examines the macroeconomic usage of aid using panel data for a broad sample of aid-recipients. By definition an increase in aid must go toward a reduction in the current account balance (absorbed aid), an increase in capital outflows, or reserve accumulation.",
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    {
      "heading": "Summary and scope",
      "content": "- Paper examines the macroeconomic usage of aid using panel data for a broad sample of aid-recipients.\n- By definition an increase in aid must go toward a reduction in the current account balance (absorbed aid), an increase in capital outflows, or reserve accumulation.\n- Aid spending is defined as the increase in government fiscal expenditures as a result of aid."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Short-run absorption is typically very low.\n- Much aid exits through the capital account.\n- Aid spending is significantly greater than aid absorption, implying that aid systematically leads to an injection of domestic liquidity in recipient economies.\n- The evidence may help illuminate the rather weak link between aid and growth found in the literature."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Reinforces the case for greater coordination between fiscal and monetary authorities in response to aid inflows.\n- Managing the liquidity injection from aid requires attention to both fiscal expenditure behavior and monetary/reserve responses."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Current account balance, Private investment, Public investment and public-private partnerships (PPP), Reserves accumulation, Terms of trade\n- Keywords: current account, GDP, Mean GDP, WP\n\n---\n\n Content in this bundle\n\n- wp0834\n  - wp0834 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp0834 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/where-did-all-the-aid-go-an-empirical-analysis-of-absorption-and-spending-21605"
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    "[Markdown version](/en/publications/wp/issues/2016/12/31/where-did-all-the-aid-go-an-empirical-analysis-of-absorption-and-spending-21605/index.md)",
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    "Authors: Shekhar Aiyar, Ummul Hasanath Ruthbah",
    "Published: February 1, 2008",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451868968.001",
    "Paper examines the macroeconomic usage of aid using panel data for a broad sample of aid-recipients.",
    "By definition an increase in aid must go toward a reduction in the current account balance (absorbed aid), an increase in capital outflows, or reserve accumulation.",
    "Aid spending is defined as the increase in government fiscal expenditures as a result of aid.",
    "Short-run absorption is typically very low.",
    "Much aid exits through the capital account.",
    "Aid spending is significantly greater than aid absorption, implying that aid systematically leads to an injection of domestic liquidity in recipient economies.",
    "The evidence may help illuminate the rather weak link between aid and growth found in the literature.",
    "Reinforces the case for greater coordination between fiscal and monetary authorities in response to aid inflows.",
    "Managing the liquidity injection from aid requires attention to both fiscal expenditure behavior and monetary/reserve responses.",
    "Subject: Current account balance, Private investment, Public investment and public-private partnerships (PPP), Reserves accumulation, Terms of trade",
    "Keywords: current account, GDP, Mean GDP, WP",
    "**_wp0834**"
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