Rukmani Gounder

Aid-growth nexus: empirical evidence from Fiji

Foreign aid to the island economies is a major source for foreign exchange and resource needs. This paper presents an empirical analysis of the relationship between foreign aid and economic growth in the case of Fiji. A neoclassical production function is applied to estimate the aid-growth nexus. Since the data employed are time series for the period 1968 to 1996, the Autoregressive Distributed Lag approach to cointegration is utilized to estimate the models. Components of total aid, such as grant aid, loan aid, technical cooperation, bilateral and multilateral aid flows are also utilized to estimate a disaggregated short-run and long-run relationship between foreign aid and economic growth. The results show that total aid flows and its various forms, i.e. bilateral aid, grant aid and technical cooperation grant aid, has a significant impact on economic growth in Fiji. As for domestic resources, only exports and private investments in two equations show positive contribution to growth.

Empirical results of aid motivations: Australia's bilateral aid program

Abstract This paper briefly surveys the existing literature on the motivations of overseas aid. The emphasis is on the two competing models of recipient need and donor interest, and the paper estimates these two models using data for Australian bilateral aid. Both the recipient need model and the donor interest model are supported by the econometric analysis. This is in stark contrast to the results of other studies for “large” states, such as the United States and the United Kingdom. These prior studies show no support for the recipient need model whereas the donor interest model is supported. The atypical result for the Australian bilateral aid program requires further analysis in terms of non-nested hypotheses.

Modelling of aid motivation using time series data: The case of Papua New Guinea

In 1984 the Jackson Report on Australias overseas aid programme, in part, focused attention on objectives and priorities in the aid programme. There is a unique aid relationship between Australia and Papua New Guinea. This paper analyses what motivates Australias provision of aid. The aid motivation literature addresses this issue by employing cross-section data to all recipient countries, thus imposing uniformity on them. It is argued in this study that time series analysis is required to answer the question of aid motivation. The econometric results obtained by testing the recipient need and donor interest models provide support for both. Applications of non-nested tests indicate acceptance of the recipient need model and rejection of the donor interest model.

Long memory properties of real interest rates for 16 countries

This study examines the long-run dynamics of ex post and ex ante real interest rates for 16 countries. Three real interest rates – the realized (ex post) rate and two ex ante rates – are examined for each of the 16 countries. The magnitude of persistence is estimated using the ARFIMA model. The key empirical results suggest that for the majority of the 16 countries, the long-memory parameters of the three real rates lie between zero and one, and the parameters tend to be considerably smaller for the ex post real rate compared with both of the two ex ante rates.

An empirical investigation of development assistance and growth for the case of Fiji

Presents an empirical analysis of the relationship between development assistance and economic growth for the case of Fiji. Foreign aid to the island economies is a major source for foreign exchange and resource needs. A neoclassical production function is applied in this study to estimate the aid‐growth nexus. Components of total aid, such as grant aid, loan aid, technical co‐operation, bilateral and multilateral aid flows are also employed to estimate a disaggregated impact of foreign aid in the short run and in the long run. The results show that bilateral aid, grant aid, and technical co‐operation grant have a significant impact on economic growth in Fiji. On the other hand, domestic resources do not contribute significantly to economic growth in Fiji.

Non-nested models of Australia's overseas aid program

After briefly surveying the existing on overseas aid motivations, some empirical results are presented for Australian bilateral aid in terms of the two competing theories in the aid literature, namely the recipient need model and the donor interest model. The empirical results for Austrlia are atypical in that there is support for both hypotheses. This is contrast to the results of previous studies of ‘large’ nation states, the United States, Britain, Germany, France and Japan, which have found support for the donor interst model but not the recipient need model. Given that the empirical results reported here are consistent with both models, this paper then proceeds to apply the relatively new tests of non-nested hypotheses to the models. The results indicate that Australias aid program has both recipient need and donor interest concerns. I some years the recipient need motive dominates, and in other years, donor interest dominates.

Neglected dimensions of development: inequality, conflict and aid

Purpose – As ethnic diversity is regarded as a determinant of growth, this study engages in an analysis of diversity as the forte behind better economic performance and where social stability of a nation is necessary to achieve growth. While these factors alone may not be sufficient to achieve growth and maintain social harmony, domestic institutions and good governance are regarded as vital factors. Design/methodology/approach – Differential performances of diverse ethnic groups are most influential contributions of social capital and its growth impact. In this framework there is a larger role of aid to provide security to a nation to achieve its development objectives. An evaluation of ethnic diversity and land issues in Fiji is undertaken with concerns of a market economy, policies and governance. Findings – An examination of the opposing nature of ethnic diversity and land issues in Fiji provides an insight not only of ethnic conflict, but also of the role of aid to solve conflict. A discussion on ethnicity and being equal in the market relates to the reason for equality before identity. The analysis indicates the role foreign aid can play to achieve stability and avoid ethnic conflict for growth in Fiji. Originality/value – The paper indicates the global issues of inequality and conflict and policy implications for Fiji and the nations facing such problems and aid donors’ role for growth and development.

FIJI'S ECONOMIC GROWTH IMPEDIMENTS

Good governance requires necessary social, economic, political and institutional factors to contribute to higher growth prospects. Since the 1987 military coups some of the issues that have confronted the people of Fiji and others cointegrate with ethnicity, politics and institutions. This article links these issues and evaluates the characteristics and factors associated to economic growth and the implications of coups on development. Can institutions resolve ethnic conflict in Fiji and lessen the economic hardship of the people, particularly having implemented various economic reform programmes to respond to the imperatives of globalization?The lost decade of economic development will be further prolonged due to the crises of the May 2000 coup. Quality institutions are necessary to mitigate adverse economic consequences of growth.

The measurement of inequality in Fiji's household income distribution

Purpose - Measures of inequality determine the effectiveness of social and economic policies aimed at reducing inequality and to design effective intervention policies. The purpose of this paper is to focus on poverty reduction and welfare improving impacts of reducing income inequality in the case of Fiji. Using Fijis Household Income and Expenditure Survey 2002-2003, a comprehensive analysis is used to measure the level of inequality by household income, quintile income distribution, decomposition of inequality by ethnicity and regional groups, and the household income inequality by source of income. Design/methodology/approach - Several statistical techniques have been applied to investigate the degree of inequality in the household income. These include the Gini coefficient, the Nelson ratio, the concentration index and the Atkinson index. An evaluation by ethnicity, regions and household income sources reflects the level of inequality, and concerns for policies and governance. Findings - The results show that urban households, in particular, experience greater inequalities, in both positive and normative terms. The Indo-Fijian households experience greater income inequalities than the Fijian households. Decomposition results for the separate factor income components also indicate major sources of inequality. These findings clearly establish that Fiji still has a long way to go in reducing the income gaps between the rich and the poor in both rural and urban households. Originality/value - The paper is a first study that estimates various measures of inequality in the case of Fiji. The implication of the empirical findings suggests that Fiji is unlikely to achieve its Millennium Development Goal of halving poverty rate by 2015 due to the large income differentials by ethnicity and in the urban-rural areas.

Motivation Models of Australia's Bilateral Aid Program: The Case of Indonesia

This paper is concerned with the question: what motivates Australias provision of overseas aid to Indonesia? The econometric results on time series data obtained by testing a recipient need and a donor interest model suggest both these concerns are relevant to Australian aid decisons on Indonesia To determine which model dominates, non-nested tests were conducted; these indicated acceptance of the recipient need model and rejection of the donor interest model. Thus Australias aid to Indonesia was found to be determined by recipient need rather than donor interest.