Volatility of Development Aid: From the Frying Pan into the Fire?
AbstractSummary The paper, building on the authors' previous analysis, examines the relative volatility of aid flows into developing countries and their domestic revenue, using new data, and three alternative measures of aid instability (relative volatility vis-à-vis fiscal revenue, unpredictability of aid disbursement relative to commitments, and failure of aid to smooth fluctuations in aggregate income). It finds that the volatility of aid flows is still much greater than that of domestic revenue and that this difference is not decreasing. Especially in very poor, aid-dependent countries, this high volatility of inflows makes the macroeconomy hard to manage. Further, the influence of aid has been procyclical and not countercyclical: aid has failed to act either as a stabilizing force or as an insurance mechanism. We argue that, to counter these unwelcome trends, donors need to be able to respond more speedily and effectively to large adverse shocks, and their conditionalities need to become more flexible--possibilities explicitly discussed elsewhere in this Special Section.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoArticle provided by Elsevier in its journal World Development.
Volume (Year): 36 (2008)
Issue (Month): 10 (October)
Contact details of provider:
Web page: http://www.elsevier.com/locate/worlddev
external aid ODA volatility predictability developing countries;
Other versions of this item:
- A. Javier Hamann & Ales Bulir, 2006. "Volatility of Development Aid: From the Frying Pan Into the Fire?," IMF Working Papers 06/65, International Monetary Fund.
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.:
- Sanjeev Gupta & Catherine Pattillo & Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 535-552, 08.
- Cogley, Timothy & Nason, James M., 1995.
"Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 19(1-2), pages 253-278.
- Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory 93-01, Federal Reserve Bank of San Francisco.
- Michel A. Robe & Stephane Pallage, 2000.
"Foreign Aid And The Business Cycle,"
Computing in Economics and Finance 2000
107, Society for Computational Economics.
- George Mavrotas & David Fielding, 2010.
"The Volatility of Aid,"
- Erwin Tiongson & Benedict J. Clements & Sanjeev Gupta, 2003.
"Foreign Aid and Consumption Smoothing: Evidence from Global Food Aid,"
IMF Working Papers
03/40, International Monetary Fund.
- Sanjeev Gupta & Benedict Clements & Erwin R. Tiongson, 2004. "Foreign Aid and Consumption Smoothing: Evidence from Global Food Aid," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 379-390, 08.
- Valerie Cerra & Sweta C. Saxena, 2005.
"Growth Dynamics: The Myth of Economic Recovery,"
- Sweta Chaman Saxena & Valerie Cerra, 2005. "Growth Dynamics: The Myth of Economic Recovery," IMF Working Papers 05/147, International Monetary Fund.
- Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
- Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
- Stéphane Pallage & Michel A. Robe & Catherine Bérubé, 2006. "The Potential of Foreign Aid as Insurance," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 5.
- Nancy Birdsall, 2004. "Seven Deadly Sins: Reflections on Donor Failings," Working Papers 50, Center for Global Development.
- A. Javier Hamann & Ales Bulir, 2006.
"Volatility of Development Aid: From the Frying Pan Into the Fire?,"
IMF Working Papers
06/65, International Monetary Fund.
- Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, vol. 36(10), pages 2048-2066, October.
- Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
- Ramey, Garey & Ramey, Valerie A, 1995.
"Cross-Country Evidence on the Link between Volatility and Growth,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1138-51, December.
- 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.
- Sanjeev Gupta & Catherine A. Pattillo & Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," IMF Working Papers 06/1, International Monetary Fund.
- Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-27, April.
- Stephane Pallage & Michel A. Robe, 2003. "On the Welfare Cost of Economic Fluctuations in Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 677-698, 05.
- Torsvik, Gaute, 2005. "Foreign economic aid; should donors cooperate?," Journal of Development Economics, Elsevier, vol. 77(2), pages 503-515, August.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.