Aid and income: Another time-series perspective

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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Date
2015
Major/Subject
Mcode
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Language
en
Pages
19-30
Series
WORLD DEVELOPMENT, Volume 69
Abstract
This study provides a replication of the empirical results reported by Nowak-Lehmann, Dreher, Herzer, Klasen, and Martínez-Zarzoso (2012) (henceforth NDHKM). We uncover that NDHKM relied on a regression model which included a log transformation of variables that are not strictly positive. This led to nonrandom omission of a large proportion of observations. Furthermore, we show that NDHKM’s use of co-integrated regressions is not a suitable empirical strategy for estimating the causal effect of aid on income. Evidence from a Panel VAR model estimated on the dataset of NDHKM, suggests a positive and statistically significant long-run effect of aid on income.
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Keywords
foreign aid, growth, time-series, VAR models
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Citation
Lof, M, Mekasha, T J & Tarp, F 2015, ' Aid and income: Another time-series perspective ', WORLD DEVELOPMENT, vol. 69, pp. 19-30 . https://doi.org/10.1016/j.worlddev.2013.12.015