This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Foreign Aid and the Business Cycle

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Pallage, Stephane
Robe, Michel A

Additional information is available for the following registered author(s):

Abstract

This paper documents empirical regularities in the foreign aid flows to developing countries over three decades. In spite of a large body of literature on foreign aid and its impact on recipients, surprisingly little is known about its business cycle characteristics. The authors show that for the vast majority of African recipients, aid flows are a major source of income that is highly volatile and, most importantly, overwhelmingly procyclical. For recipients outside of Africa, there is a similar--if somewhat less pronounced--pattern of aid procyclicality. In contrast, there is little evidence of aid procyclicality with the business cycle of donors. In light of the very high volatility of output in developing countries, the procyclicality of foreign aid flows from the recipients' perspective raises serious questions related to their welfare and growth. Copyright 2001 by Blackwell Publishing Ltd.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=roie&volume=9&issue=4&year=2001&part=null
File Format: text/html
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 9 (2001)
Issue (Month): 4 (November)
Pages: 641-72
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:reviec:v:9:y:2001:i:4:p:641-72

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0965-7576

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

This item is featured on the following reading lists:
  1. Economic Logic blog
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Mendoza, Enrique G, 1995. "The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 101-37, February. [Downloadable!] (restricted)
  3. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March. [Downloadable!] (restricted)
    Other versions:
  6. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
    Other versions:
  7. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March. [Downloadable!] (restricted)
  8. Enrique G. Mendoza, 1992. "The Terms of Trade and Economic Fluctuations," IMF Working Papers 92/98, International Monetary Fund.
  9. Easterly, William, 1997. "The ghost of financing gap : how the Harrod-Domar growth model still haunts development economics," Policy Research Working Paper Series 1807, The World Bank. [Downloadable!]
  10. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18. [Downloadable!]
  11. Eswar Prasad & Pierre-Richard Agénor & C. John McDermott, 1999. "Macroeconomic Fluctuations in Developing Countries - Some Stylized Facts," IMF Working Papers 99/35, International Monetary Fund.
    Other versions:
  12. Michael A. Kouparitsas, 1996. "North-South business cycles," Working Paper Series, Macroeconomic Issues WP-96-9, Federal Reserve Bank of Chicago. [Downloadable!]
  13. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
    Other versions:
  14. Atkeson, Andrew, 1991. "International Lending with Moral Hazard and Risk of Repudiation," Econometrica, Econometric Society, vol. 59(4), pages 1069-89, July. [Downloadable!] (restricted)
  15. Albert Marcet & Ramon Marimon, 1992. "Communication, commitment, and growth," Discussion Paper / Institute for Empirical Macroeconomics 74, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  16. Bankim Chadha & Eswar Prasad, 1992. "Are Prices Countercyclical?," IMF Working Papers 92/88, International Monetary Fund.
  17. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    Other versions:
  18. Lane, Philip R., 1999. "Do International Investment Income Flows Smooth Income?," CEPR Discussion Papers 2123, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  19. Fiorito, Riccardo & Kollintzas, Tryphon, 1994. "Stylized facts of business cycles in the G7 from a real business cycles perspective," European Economic Review, Elsevier, vol. 38(2), pages 235-269, February. [Downloadable!] (restricted)
    Other versions:
  20. Cooley, Thomas F. & Ohanian, Lee E., 1991. "The cyclical behavior of prices," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 25-60, August. [Downloadable!] (restricted)
    Other versions:
  21. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
  22. Steve Ambler & Emanuela Cardia & Christian Zimmermann, 1999. "International Business Cycles: What are the Facts?," Cahiers de recherche CREFE / CREFE Working Papers 90, CREFE, Université du Québec à Montréal. [Downloadable!]
    Other versions:
  23. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January. [Downloadable!] (restricted)
  24. Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank. [Downloadable!]
    Other versions:
  25. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December. [Downloadable!] (restricted)
  26. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank. [Downloadable!]
    Other versions:
  27. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fleck, Robert K. & Kilby, Christopher, 2009. "Changing Aid Regimes? U.S. Foreign Aid from the Cold War to the War on Terror," Villanova School of Business Department of Economics and Statistics Working Paper Series 1, Villanova School of Business Department of Economics and Statistics. [Downloadable!]
  2. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Sayan, Serdar & Tekin-Koru, Ayca, 2007. "Remittances, Business Cycles and Poverty: The Recent Turkish Experience," MPRA Paper 6029, University Library of Munich, Germany. [Downloadable!]
  4. Addison, Tony & Mavrotas, George & McGillivray, Mark, 2005. "Development Assistance and Development Finance: Evidence and Global Policy Agendas," Working Papers RP2005/23, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  5. Bulir, Ales & Hamann, A. Javier, 2001. "How Volatile and Unpredictable are Aid Flows, and What are the Policy Implications?," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  6. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances: How Do Migrant Workers Respond to Cyclical Movements of GDP at Home?," IMF Working Papers 06/52, International Monetary Fund. [Downloadable!]
  7. Stephane Pallage & Michel Robe, 2000. "Magnitude X on the Richter Scale: Welfare Cost of Business Cycles in Developing Countries," Cahiers de recherche CREFE / CREFE Working Papers 124, CREFE, Université du Québec à Montréal. [Downloadable!]
    Other versions:
  8. Smita Wagh & Sanjeev Gupta & Catherine A. Pattillo, 2006. "Are Donor Countries Giving More or Less Aid?," IMF Working Papers 06/1, International Monetary Fund. [Downloadable!]
  9. Almuth Scholl, 2009. "Aid Effectiveness and Limited Enforceable Conditionality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(2), pages 377-391, April. [Downloadable!] (restricted)
    Other versions:
  10. Chauvet, Lisa & Guillaumont, Patrick, 2008. "Aid, Volatility and Growth Again: When Aid Volatility Matters and When It Does Not," Working Papers RP2008/78, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  11. Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Consumption Smoothing: Evidence from Global Food Aid," IMF Working Papers 03/40, International Monetary Fund. [Downloadable!]
  12. Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics. [Downloadable!]
  13. Hansen, Henrik & Headey, Derek, 2007. "The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Timeseries Analysis," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  14. Headey, Derek & Malaiyandi, Sangeetha & Fan, Shenggen, 2009. "Navigating the perfect storm: Reflections on the food, energy, and financial crises," IFPRI discussion papers 889, International Food Policy Research Institute (IFPRI). [Downloadable!]
  15. Claudia M. Buch & Anja Kuckulenz & Marie-Helene Le Manchec, 2002. "Worker Remittances and Capital Flows," Kiel Working Papers 1130, Kiel Institute for the World Economy. [Downloadable!]
  16. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Development assistance and development finance: evidence and global policy agendas," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(6), pages 819-836. [Downloadable!]
  17. Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane, 2007. "Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  18. John Serieux, 2007. "Managing the Exchange Rate Consequences of an MDG-Related Scale-up in HIV/AIDS Financing," Conference Paper 1, International Policy Centre for Inclusive Growth. [Downloadable!]
  19. Odedokun, Matthew, 2003. "Analysis of Deviations and Delays in Aid Disbursements," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  20. K C Neanidis & D Varvarigos, 2005. "The Impact of Foreign Aid on Economic Growth: Volatility of Disbursements and Distribution of Receipts," Centre for Growth and Business Cycle Research Discussion Paper Series 56, Economics, The Univeristy of Manchester. [Downloadable!]
  21. Rune Jansen Hagen, 2002. "Marginalisation in the Context of Globalisation: Why Is Africa so Poor?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 147-179. [Downloadable!]
  22. Cristina Arellano & Aleš Bulir & Timothy D. Lane & Leslie Lipschitz, 2005. "The Dynamic Implications of Foreign Aid and Its Variability," IMF Working Papers 05/119, International Monetary Fund. [Downloadable!]
    Other versions:
  23. Kyriakos C. Neanidis & Dimitrios Varvarigos, 2007. "The Allocation of volatile aid and economic growth: Evidence and a suggestive theory," Discussion Paper Series 2007_07, Department of Economics, Loughborough University, revised Mar 2007. [Downloadable!]
  24. Alex Cobham (QEH), . "Tax Evasion, Tax Avoidance and Development Finance," QEH Working Papers qehwps129, Queen Elizabeth House, University of Oxford. [Downloadable!]
Statistics
Access and download statistics

Did you know? Data contributors to RePEc receive monthly emails with details about downloads and abstract views of their works.

This page was last updated on 2009-11-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.