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Measuring the Effect of Foreign Aid on Growth and Poverty Reduction or The Pitfalls of Interaction Variables

Measuring the Effect of Foreign Aid on Growth and Poverty Reduction or The Pitfalls of Interaction Variables by J. J. Polak
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Regressions in a number of recent papers written by staff members of the World Bank and the IMF rely on an interaction variable (IAV) to establish the effects of foreign aid on economic growth or the reduction of poverty. The common assumption in these papers is that if the coefficient of this IAV is statistically significant, then both of its components have a significant effect on the dependent variable. That assumption is not justified in its generality, and this paper develops two techniques that show a high probability that in at least two of the three studies analyzed one of the components of the IAV may not have a significant effect.
International Monetary Fund; June 2007
13 pages; ISBN 9781452754154
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Title: Measuring the Effect of Foreign Aid on Growth and Poverty Reduction or The Pitfalls of Interaction Variables
Author: J. J. Polak; Joydeep Roy; Catherine A. Pattillo
 
ISBNs
1451911629
9781451867091
9781451911626
9781452754154