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The Volatility of Aid

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  • Fielding, David
  • Mavrotas, George

Abstract

Issues related to the volatility of aid flows are now becoming crucial in view of their relevance to the achievement of the Millennium Development Goals. The paper examines aid volatility using data for 66 aid recipients over the period 1973-2002. We improve upon earlier work in this important area by disaggregating total aid inflows into sector and programme aid. In this way they avoid focussing on a single aggregate, unlike most previous studies on aid volatility. They also adopt a different methodology to capture aid volatility. The institutional quality of the aid recipient affects the stability of sector aid but not that of programme assistance. Moreover, more open economies, which tend to be smaller and richer, ceteris paribus, are associated with more volatile sector aid flows. [Discussion Paper No. 2005/06]

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2005/dp2005-06.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number DP2005/06.

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Length: 22 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:unu:wpaper:dp2005-06

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Related research

Keywords: aid volatility; aid heterogeneity; project aid; programme assistance; MDGs;

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References

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  1. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  2. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
  3. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Mavrotas, George, 2003. "Which Types of Aid Have the Most Impact?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  5. Lin, Tun & Mavrotas, George, 2004. "A Contract Perspective on the International Finance Facility," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
  7. Erwin Tiongson & Benedict J. Clements & Sanjeev Gupta, 2003. "Foreign Aid and Consumption Smoothing," IMF Working Papers 03/40, International Monetary Fund.
  8. Peter S. Heller & Sanjeev Gupta, 2002. "More Aid—Making It Work for the Poor," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 3(4), pages 131-146, October.
  9. Bulir, Ales & Hamann, A. Javier, 2001. "How Volatile and Unpredictable are Aid Flows, and What are the Policy Implications?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  11. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 03/88, International Monetary Fund.
  12. Michel A. Robe & Stephane Pallage, 2000. "Foreign Aid And The Business Cycle," Computing in Economics and Finance 2000 107, Society for Computational Economics.
  13. Addison, Tony & Mavrotas, George & McGillivray, Mark, 2005. "Aid, Debt Relief and New Sources of Finance for Meeting the Millennium Development Goals," Working Paper Series RP2005/09, World Institute for Development Economic Research (UNU-WIDER).
  14. Tony Killick, 2004. "Politics, Evidence and the New Aid Agenda," Development Policy Review, Overseas Development Institute, vol. 22(1), pages 5-29, 01.
  15. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
  16. 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.
  17. George Mavrotas, 2002. "Foreign aid and fiscal response: Does aid disaggregation matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(3), pages 534-559, September.
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