Will the global financial crisis lead to lower foreign aid? A first look at United States ODA
AbstractAnalyzing US economic and foreign aid data from 1967 to 2007, this paper investigates whether adverse economic and financial conditions are negatively linked to official development assistance (ODA). It finds empirical evidence that US ODA has tended to decline as its economic conditions worsen. A 1 unit increase in the misery index (sum of inflation and unemployment) is associated with a roughly 0.01 percentage point decline in US ODA expressed as a share of GNI. Furthermore, an increase in financial volatility from 1 percent to 2 percent (measured by the standard deviation of the rate of return of the S&P500) is associated with a decrease in US ODA by about $2.78 billion. Informed by the empirical results in this paper, and based on very rough guesstimates, a potential decline in US ODA of anywhere from 13 to 30 percent could occur depending on the severity of the economic conditions in 2009. This predicted decline in ODA is much lower than some of the guesstimates so far by different analysts. Based on the US historical pattern, ODA is indeed at risk; nevertheless, it need not decline significantly during adverse economic times.
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 InfoPaper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2009-01.
Date of creation: 2009
Date of revision:
ODA; foreign aid; financial crisis; misery index;
Find related papers by JEL classification:
- F35 - International Economics - - International Finance - - - Foreign Aid
- G01 - Financial Economics - - General - - - Financial Crises
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
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.:
- Younas, Javed, 2008. "Motivation for bilateral aid allocation: Altruism or trade benefits," European Journal of Political Economy, Elsevier, vol. 24(3), pages 661-674, September.
- Andrew Mold & Dilan Ölcer & Annalisa Prizon, 2008. "The Fallout from the Financial Crisis (3): Will Aid Budgets Fall Victim to the Credit Crisis?," OECD Development Centre Policy Insights 85, OECD Publishing.
- Alesina, Alberto & Dollar, David, 2000.
" Who Gives Foreign Aid to Whom and Why?,"
Journal of Economic Growth,
Springer, vol. 5(1), pages 33-63, March.
- Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
- Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
- Anne Boschini & Anders Olofsg�rd, 2007. "Foreign aid: An instrument for fighting communism?," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 622-648.
- Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises," IMF Working Papers 08/224, International Monetary Fund.
- Chong, Alberto & Gradstein, Mark, 2008. "What determines foreign aid? The donors' perspective," Journal of Development Economics, Elsevier, vol. 87(1), pages 1-13, August.
- Franklin Allen and Giorgia Giovannetti, 2010.
"Fragile Countries And The 2008-2009 Crisis,"
EUI-RSCAS Working Papers
13, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
- Era Dabla-Norris & Camelia Minoiu & Luis-Felipe Zanna, 2010. "Business Cycle Fluctuations, Large Shocks, and Development Aid," IMF Working Papers 10/240, International Monetary Fund.
- Sèna Kimm Gnangnon, 2011. "The consequences of Fiscal Episodes in OECD Countries for Aid Supply," Working Papers halshs-00613161, HAL.
- Das, Debasish Kumar & Dutta, Champa Bati, 2012.
"Global financial crisis and foreign development assistance shocks in least developing countries,"
40281, University Library of Munich, Germany.
- Debasish Kumar Das & Champa Bati Dutta, 2013. "Global Financial Crisis And Foreign Development Assistance Shocks In Least Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 1-41, June.
- Gravier-Rymaszewska, Joanna, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Andrea Filippo Presbitero, 2009. "The 2008-2009 Financial Crisis and the HIPCs: Another Debt Crisis?," Mo.Fi.R. Working Papers 29, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Sèna Kimm Gnangnon, 2013. "How do OECD donor countries distribute foreign aid among developing countries during their fiscal episodes?," Working Papers halshs-00786009, HAL.
- Dang, Hai-Anh & Knack, Steve & Rogers, Halsey, 2009.
"International aid and financial crises in donor countries,"
Policy Research Working Paper Series
5162, The World Bank.
- Dang, Hai-Anh & Knack, Stephen & Rogers, F. Halsey, 2013. "International aid and financial crises in donor countries," European Journal of Political Economy, Elsevier, vol. 32(C), pages 232-250.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fordham Economics).
If references are entirely missing, you can add them using this form.