How Volatile and Unpredictable are Aid Flows, and What are the Policy Implications?
AbstractThis paper examines empirical evidence on the volatility and uncertainty of aid flows, and the main policy implications. Aid is found to be more volatile than fiscal revenues- particularly in highly aid-dependent countries-and mildly procyclical in relation to activity in the recipient country. These findings imply that the current pattern of aid disbursements is welfare-reducing. We also find that uncertainty about aid disbursements is large and that the information content of commitments made by donors is either very small or statistically insignificant. Policies to cope with these features of aid, as well as broader international efforts to reduce the volatility and procyclicality of aid, are briefly discussed.
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Bibliographic InfoPaper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2001/143.
Length: 38 pages
Date of creation: 2001
Date of revision:
External aid; Volatility; Predictability; IMF-supported programs;
Other versions of this item:
- A. Javier Hamann & Ales Bulir, 2001. "How Volatile and Unpredictable Are Aid Flows, and What Are the Policy Implications?," IMF Working Papers 01/167, International Monetary Fund.
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