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Direct & Indirect Effects of Aid Volatility on Growth: Do Stronger Institutions Play a Role?

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  • Kathavate, Jay
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    Abstract

    This paper develops a political economy model to analyze the direct and indirect effects of aid volatility on growth and the outcome of higher institutional quality on the effect of aid volatility on growth. Using time-series cross section data for 77 countries from 1984-2007, the effects of aid volatility on growth are empirically tested. It is concluded that the relationship between growth aid volatility is significantly negative and dependent on the level of institutional quality. The results are robust to additional covariates, alternate sub-samples, non-linearities, different period averages and various computations of aid volatility.

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    File URL: http://mpra.ub.uni-muenchen.de/45187/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45187.

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    Date of creation: 18 Mar 2013
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    Handle: RePEc:pra:mprapa:45187

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    Keywords: Foreign aid volatility; Institutional quality; Indirect effects of aid volatility; political economy of aid volatility;

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