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.
Original language | English |
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Pages (from-to) | 19-30 |
Journal | World Development |
Volume | 69 |
DOIs | |
Publication status | Published - 2015 |
MoE publication type | A1 Journal article-refereed |
Keywords
- foreign aid
- growth
- time-series
- VAR models