Do Countries with Greater Credit Constraints Receive More Foreign Aid?

Bandyopadhyay, Subhayu, Lahiri, Sajal, Younas, Javed, Review - Federal Reserve Bank of St. Louis

Donor nations may recognize that some developing nations face credit constraints in the world capital market. This knowledge may prompt donors to increase aid flows to alleviate the constraint. In such a situation, flows of foreign aid and foreign loans to developing nations may be substitutes for each other. The authors use data from 114 aid-recipient countries over the 1997-2008 period to investigate the relationship between foreign aid and foreign loans. The central finding is that this relationship is negative, lending support to the substitution hypothesis. (JEL F35, O16)

Federal Reserve Bank of St. Louis Review, November/December 2012, 94(6), pp. 481-93.

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Publication information: Article title: Do Countries with Greater Credit Constraints Receive More Foreign Aid?. Contributors: Bandyopadhyay, Subhayu - Author, Lahiri, Sajal - Author, Younas, Javed - Author. Journal title: Review - Federal Reserve Bank of St. Louis. Volume: 94. Issue: 6 Publication date: November/December 2012. Page number: 481+. © Federal Reserve Bank of St. Louis Nov/Dec 1996. Provided by ProQuest LLC. All Rights Reserved.

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