This paper proposes a new instrumental variables approach for consistent and asymptotically efficient estimation of panel data models with weakly exogenous or endogenous regressors and residuals generated by a multifactor error structure. In this case, the standard dynamic panel estimators fail...

Does foreign aid contribute to economic growth? If so, is the impact of aid conditional on good policies? This is a controversial issue. While the World Bank (1998) contends that the aid is effective only if recipient governments have good policies, others refute this view and argue that aid...