Advanced Search
MyIDEAS: Login to save this paper or follow this series

Does aid mitigate external shocks?

Contents:

Author Info

  • Paul Collier
  • Benedikt Goderis

Abstract

This paper investigates the role of aid in mitigating the adverse effects of commodity export price shocks on growth in commodity-dependent countries. Using a large cross-country dataset, we find that negative shocks matter for short-term growth, while the ex ante risk of shocks does not seem to matter. We also find that both the level of aid and the flexibility of the exchange rate substantially lower the adverse growth effect of shocks. While the mitigating effect of aid is significant in both countries with pegs and countries with floats, the effect seems to be smaller for the latter, suggesting that aid and exchange rate flexibility are partly substitutes. We investigate whether aid has historically been targeted at shock-prone countries, but find no evidence that this is the case. This suggests that donors could increase aid effectiveness by redirecting aid towards countries with a high incidence of commodity export price shocks.

Download Info

If 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.
File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2007-18text.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2007-18.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:csa:wpaper:2007-18

Contact details of provider:
Postal: Manor Road, Oxford, OX1 3UQ
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Email:
Web page: http://www.csae.ox.ac.uk/
More information through EDIRC

Related research

Keywords: commodity prices; aid; growth; external shocks;

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  2. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006, Stata Users Group 8, Stata Users Group.
  3. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, Elsevier, vol. 74(1), pages 158-169, January.
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  5. Dehn, Jan, 2000. "Commodity price uncertainty in developing countries," Policy Research Working Paper Series, The World Bank 2426, The World Bank.
  6. David Roodman, 2006. "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Working Papers, Center for Global Development 103, Center for Global Development.
  7. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series, The World Bank 1777, The World Bank.
  8. Collier, Paul & Goderis, Benedikt, 2008. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," MPRA Paper 17315, University Library of Munich, Germany.
  9. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(4), pages 725-753, August.
  10. Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers, CERDI 199910, CERDI.
  11. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  12. Jan Dehn, 2000. "Commodity Price Uncertainty in Developing Countries," Economics Series Working Papers, University of Oxford, Department of Economics WPS/2000-12, University of Oxford, Department of Economics.
  13. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, Elsevier, vol. 79(1), pages 99-106, April.
  14. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components, Boston College Department of Economics S435901, Boston College Department of Economics, revised 28 Jul 2014.
  15. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, Elsevier, vol. 84(1), pages 155-187, September.
  16. Jan Dehn, 2000. "Commodity price uncertainty in developing countries," CSAE Working Paper Series, Centre for the Study of African Economies, University of Oxford 2000-12, Centre for the Study of African Economies, University of Oxford.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Economics Bulletin, AccessEcon, vol. 6(41), pages 1-16.
  2. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Post-Print, HAL hal-00331902, HAL.
  3. Era Dabla-Norris & Camelia Minoiu & Luis-Felipe Zanna, 2010. "Business Cycle Fluctuations, Large Shocks, and Development Aid," IMF Working Papers, International Monetary Fund 10/240, International Monetary Fund.
  4. Paul Collier & Benedikt Goderis, 2009. "Structural policies for shock-prone developing countries," Oxford Economic Papers, Oxford University Press, Oxford University Press, vol. 61(4), pages 703-726, October.
  5. Sergio Tezanos Vázquez & Rogelio Madrueño Aguilar & Marta Guijarro Garví, 2009. "Impacto de la ayuda sobre el crecimiento económico. El caso de América Latina y el Caribe," Documentos de trabajo sobre cooperación y desarrollo, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria 200904, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria.
  6. Guillaumont, Patrick & Wagner, Laurent, 2012. "Aid and Growth Accelerations: Vulnerability Matters," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Sergio Tezanos Vázquez, 2010. "Ayuda y crecimiento: una relación en disputa," Documentos de trabajo sobre cooperación y desarrollo, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria 201001, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria.
  8. Patrick GUILLAUMONT & Laurent WAGNER, 2014. "Aid effectiveness for poverty reduction: lessons from cross-country analyses, with a special focus on vulnerable countries," Working Papers, FERDI P96, FERDI.
  9. Pettersson, Jan & Johansson, Lars M, 2009. "Tied Aid, Trade-Facilitating Aid or Trade-Diverting Aid?," Working Paper Series, Uppsala University, Department of Economics 2009:5, Uppsala University, Department of Economics.
  10. Sergio Tezanos Vázquez, 2009. "Geopolítica de la ayuda ¿Cómo optimizar el impacto de la ayuda sobre el crecimiento?," Documentos de trabajo sobre cooperación y desarrollo, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria 200903, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2007-18. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Payne).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.