Abstract
The Harrod-Domar growth model supposedly died long ago. Still today, economists in the international financial institutions (IFIs) apply the Harrod-Domar model to calculate short-run investment requirements for a target growth rate. They then calculate a 'financing gap' between the required investment and available resources and often fill the 'financing gap' with foreign aid. The financing gap model has two simple predictions: (1) aid will go into investment one for one, and (2) there will be a fixed linear relationship between growth and investment in the short run. The data soundly reject these two predictions of the financing gap model.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 423-438 |
| Number of pages | 16 |
| Journal | Journal of Development Economics |
| Volume | 60 |
| Issue number | 2 |
| DOIs | |
| State | Published - Dec 1999 |
Keywords
- Economic development
- Economic growth
- Foreign aid
- Growth models
- Investment
ASJC Scopus subject areas
- Development
- Economics and Econometrics