Template-Type: ReDIF-Paper 1.0
Author-Name: King Yoong Lim
Author-Name: Chunping Liu     
Title: Dual-objective Donors and Investment across Economic Regions: Theory and Evidence
Abstract: Based on a novel theoretical framework with a dual-objective donor giving grant (driven by benevolent objective) and loan aid (profitability motive), as well as a public
private partnership-like investment structure and multi-region feedback mechanism, we estimate a panel structural VAR model of grant aid, loan aid, private consumption,
and aggregate capital stock using data of nine economic communities/regions covering the 1961-2017 period. By allowing for cross-heterogeneity and interdependencies across
regions, we identify empirical commonalities and differences across regions. Amidst a generally weak aid-investment link, we find loan aid to Granger-cause capital accumulation, 
and among African regions it is the most (least) productive-in terms of within- and spillover effects-in the IGAD (ECOWAS) region. In addition, our results 
suggest deeper regional integration between the Sub-Saharan African regions than the collective Latin American & Caribbean regions and the two Southern Asian regions (Southeast Asia and South Asia) examined.
File-URL: http://www.ntu.ac.uk/__data/assets/pdf_file/0032/1378274/Dual-objective-Donors-and-Investment-across-Economic-Regions-Theory-and-Evidence.pdf
File-Format: Application/pdf
File-Function: First version, 2021
Creation-Date: 2021-01
Classification-JEL: F35, O40, P45
Keywords: foreign aid, donor objectives, investment, regional integration, structural VAR.
Handle: RePEc:nbs:wpaper:2021/01