TY  - RPRT
        AU  - Bandyopadhyay, Subhayu
AU  - Lahiri, Sajal
AU  - Younas, Javed
        TI  - Should Easier Access to International Credit Replace Foreign Aid?
        PY  - 2011/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 6024
        UR  - https://www.iza.org/publications/dp6024
        AB  - We examine the interaction between foreign aid and binding borrowing constraint for a recipient country. We also analyze how these two instruments affect economic growth via non-linear relationships. First of all, we develop a two-country, two-period trade-theoretic model to develop testable hypotheses and then we use dynamic panel analysis to test those hypotheses empirically. Our main findings are that: (i) better access to international credit for a recipient country reduces the amount of foreign aid it receives, and (ii) there is a critical level of international financial transfer, and the marginal effect of foreign aid is larger than that of loans if and only if the transfer (loans or foreign aid) is below this critical level.
        KW  - foreign aid
KW  - foreign loans
KW  - borrowing constraint
KW  - economic growth
KW  - fungibility
KW  - public input
        ER  -