The Fiscal Impact of Aid Flows: Evidence from Ethiopia

Fiscal; Impact; Aid; Flows; Evidence; Ethiopia; Poverty

The Impact of Foreign Aid on Government Spending, Revenue and Domestic Borrowing in Ethiopia

The main aim of this Working Paper is to assess the impact of foreign aid inflows on public expenditure, revenue and domestic borrowing in Ethiopia. The paper provides a literature overview of the fiscal effects of aid, and then applies a fiscal response model to Ethiopian data for the period 1964-2005. Since the empirical literature finds little evidence of common cross-country patterns, this highlights the important role that country-specific circumstances play in determining fiscal outcomes. By studying the particular fiscal dynamics in Ethiopia, the paper finds that foreign aid has had a positive impact on government investment, while its effect on current expenditure has been less pronounced. Moreover, by disaggregating aid inflows into grants and foreign lending, the paper is able to analyse their specific roles and impacts. The results support the conclusion that aid inflows increase public investment, with loans having a stronger impact than grants. Both aid grants and loans have a strong negative effect on domestic borrowing, suggesting that aid and domestic financing are close substitutes. Finally, the results also appear to support the hypothesis that higher aid flows displace domestic revenues. However, this particular finding does not seem to be robust across the sample.Foreign Aid, Aid Effectiveness, Fiscal Response Literature, Ethiopia

Fiscal dynamics in Ethiopia: The cointegrated VAR model with quarterly data

This paper uses the cointegrated vector autoregressive (CVAR) model to assess the dynamic relationship between foreign aid inflows, public expenditure, revenue and domestic borrowing in Ethiopia. It departs from the existing literature by using a unique quarterly fiscal dataset (1993-2008) and providing new insights into the formulation of testable fiscal hypotheses. The paper also derives and interprets structural shocks and places a strong focus on model specification. The results suggest the presence of three long-run relationships: the government budget constraint, a donor disbursement rule, and a financing trade-off. Foreign aid grants adjust to the level of development spending, which can be seen as an indication of (procyclical) aid conditionality. Moreover, domestic borrowing often compensates for lower levels of revenue and grants, highlighting the cost of aid unpredictability and revenue volatility. The policy implication is that if foreign aid flows are to be made more effective, they should be provided in a predictable and countercyclical fashion in order to smooth exogenous shocks

Sub-regional perspectives on structural change

This paper provides a comprehensive assessment of structural change patterns in the world economy. It uses a new dataset on sectoral employment produced by the International Labour Organization, which is complemented by national accounts and population data from the United Nations Department of Economic and Social Affairs. The sample includes 169 countries, representing about 99 percent of the world's output and population in 2013. One of the main contributions of this paper is its focus on the sub-regional level, which has been hitherto absent from the literature. We provide an assessment of 13 sub-regions in Africa, Asia and Latin America in order to offer deeper and richer insights into the recent dynamics of structural change. Overall, our results suggest that within-sector productivity improvements were the key driver of output per capita growth in most sub-regions. Nonetheless, structural change has also played a critical role in enhancing economic performance since 2002 - mainly through services. Changes in the demographic structure and employment rates have also contributed to the recent performance, albeit to a much lesser extent. Accelerating the pace of structural change - by exploiting existing productivity gaps - will be crucial to sustain current economic growth rates in developing regions

El Impacto Fiscal de la Asistencia Financiera: Evidencia de Etiopía

El Impacto Fiscal de la Asistencia Financiera: Evidencia de Etiopía

O Impacto Fiscal dos Fluxos de Ajuda: Evidências da Etiópia

O Impacto Fiscal dos Fluxos de Ajuda: Evidências da Etiópia

Fiscal Dynamics in Ethiopia: The Cointegrated VAR Model with Quarterly Data

This paper uses the cointegrated vector autoregressive (CVAR) model to assess the dynamic relationship between foreign aid inflows, public expenditure, revenue and domestic borrowing in Ethiopia. It departs from the existing literature by using a unique quarterly fiscal dataset (1993-2008) and providing new insights into the formulation of testable fiscal hypotheses. The paper also derives and interprets structural shocks and places a strong focus on model specification. The results suggest the presence of three long-run relationships: the government budget constraint, a donor disbursement rule, and a financing trade-off. Foreign aid grants adjust to the level of development spending, which can be seen as an indication of (procyclical) aid conditionality. Moreover, domestic borrowing often compensates for lower levels of revenue and grants, highlighting the cost of aid unpredictability and revenue volatility. The policy implication is that if foreign aid flows are to be made more effective, they should be provided in a predictable and countercyclical fashion in order to smooth exogenous shocks.Fiscal Response, Foreign Aid, Time Series Models, Africa

Aid Absorption and Spending in Africa: A Panel Cointegration Approach

This paper focuses on the macroeconomic management of large inflows of foreign aid. It investigates the extent to which African countries have coordinated fiscal and macroeconomic responses to aid surges. In practice, we construct a panel dataset to investigate the level of aid ‘absorption’ and ‘spending’. This paper departs from the recent empirical literature by utilising better measures for aid inflows and by employing cointegration analysis. The empirical short-run results suggest that, on average, Africa’s low-income countries have absorbed two-thirds of (grant) aid receipts. This suggests that most of the foreign exchange provided by the aid inflows has been used to finance imports. The other third has been used to build up international reserves, perhaps to protect economies from future external shocks. In the long-run, absorption increases but remains below its maximum (‘full absorption’). Moreover, we also show that aid resources have been fully spent, especially in support of public investment. There is only weak evidence that a share of aid flows have been ‘saved’, i.e. substituted domestic borrowing. Overall, these findings suggest that the macroeconomic management of aid inflows in Africa has been significantly better than often portrayed in comparable exercises. The implication is that African countries will be able to efficiently manage a gradual scaling up in aid resources.Macroeconomic Management, Foreign Aid, Panel Data, Africa

Targeting cancer resistance via multifunctional gold nanoparticles

POCI-01-0145-FEDER-007728 SFRH/BD/120030/2016 PD/BD/105734/2014 Pest-OE/UID/DTP/04138/2013Resistance to chemotherapy is a major problem facing current cancer therapy, which is continuously aiming at the development of new compounds that are capable of tackling tumors that developed resistance toward common chemotherapeutic agents, such as doxorubicin (DOX). Alongside the development of new generations of compounds, nanotechnology-based delivery strategies can significantly improve the in vivo drug stability and target specificity for overcoming drug resistance. In this study, multifunctional gold nanoparticles (AuNP) have been used as a nanoplatform for the targeted delivery of an original anticancer agent, a Zn(II) coordination compound [Zn(DION)2]Cl2 (ZnD), toward better efficacy against DOX-resistant colorectal carcinoma cells (HCT116 DR). Selective delivery of the ZnD nanosystem to cancer cells was achieved by active targeting via cetuximab, NanoZnD, which significantly inhibited cell proliferation and triggered the death of resistant tumor cells, thus improving efficacy. In vivo studies in a colorectal DOX-resistant model corroborated the capability of NanoZnD for the selective targeting of cancer cells, leading to a reduction of tumor growth without systemic toxicity. This approach highlights the potential of gold nanoformulations for the targeting of drug-resistant cancer cells.publishersversionpublishe