Fiscal Impact of Foreign Aid in Morocco: A Multivariate Cointegration Analysis

Abstract

The aim of this study is to evaluate the relationship between foreign aid and taxe revenue in Morocco by using the Error Correction Model Following the approach of Johansen to jointly capture the long-run relationship and short-run dynamics between aid and tax revenue. Other variables such as the shares of agriculture and industry in GDP, exports, imports and GDP are also included in the model. The results indicate that the direct effect of foreign aid on tax revenue is insignificant in the short term, but it becomes negative and significant in the long term.