Local Financial Development and the Aid-Growth Relationship

Author/Editor:

Mwanza Nkusu ; Selin Sayek

Publication Date:

December 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 04/238

Subject:

Development assistance Economic growth Foreign aid Poverty

English

Publication Date:

December 1, 2004

ISBN/ISSN:

9781451875775/1018-5941

Stock No:

WPIEA2382004

Format:

Paper

Pages:

34

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