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Aid, debt and fiscal policies in Senegal
Author(s) -
Ouattara Bazoumana
Publication year - 2006
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.1282
Subject(s) - debt , economics , fiscal policy , investment (military) , monetary economics , poverty reduction , internal debt , debt to gdp ratio , external debt , government (linguistics) , macroeconomics , government expenditure , public finance , poverty , finance , economic growth , linguistics , philosophy , politics , political science , law
This paper uses the fiscal response framework to study the effects of aid flows on key fiscal aggregates in Senegal, over the period of 1970–2000. Attention is given to the interplay between aid and debt. The paper contributes to the empirics of fiscal response modelling by deriving the standard errors and p values associated with the different mechanisms of the structural and reduced form equations. The main findings in this paper are: (i) relatively large shares of government resources are used to finance debt servicing; (ii) the impact of aid flows on domestic expenditure is statistically insignificant and (iii) debt servicing has a significant negative effect on domestic expenditure. The main policy implication of this study is that debt reduction could be a more effective policy tool than additional aid (loans) in financing pro‐poverty expenditure as well as public investment. Copyright © 2006 John Wiley & Sons, Ltd.