01986cas a2200241 a 4500 AALejournalIMF008765 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451860726 1018-5941 BD-DhAAL BD-DhAAL Ruhashyankiko, Jean-Francois. Why Do Some Countries Manage to Extract Growth from Foreign Aid? / Jean-Francois Ruhashyankiko. Washington, D.C. : International Monetary Fund, 2005. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Aid is primarily given to governments whereas the engine of sustained growth is the private sector. It is therefore illusory to investigate the impact of aid on growth without considering the impact of government interventions on the private sector. The model shows how these interventions improve capacity utilization and growth. However, distortionary interventions can also cause capacity underutilization and an increase in the informal economy, that is, the very market failures the interventions initially sought to address. Countries that fall into this trap are characterized by insufficient credibility in promoting the private sector, which translates into aid dependence and slower growth over time. The empirical evidence is supportive. This paper finds that aggregate aid has a positive impact on growth (even without diminishing returns) but the impact is substantially smaller for low-income countries. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2005/053 Full text available on IMF http://elibrary.imf.org/view/journals/001/2005/053/001.2005.issue-053-en.xml IMF e-Library