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Volatility of Development Aid: An Update

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  • Aleš Bulíř
  • A Javier Hamann

Abstract

The positive impact of foreign aid is limited by the erratic behavior of aid flows. The introduction in 1999 of various initiatives anchored in IMF Poverty Reduction Strategy Papers aimed at strengthening coordination among donors, improving the design of financial support programs, and improving domestic records of policy implementation should have led to an improvement in the time series properties of aid flows. We find no evidence of any fundamental changes in the way aid has been delivered during 2000–03. If anything, aid volatility has worsened somewhat and the information value of long-term lending commitments has declined. We take these results to mean that the main causes of the volatility and unpredictability of aid, and the broader issue of macroeconomic instability in low-income countries, may not have been addressed in a systematic manner by the donor community. IMF Staff Papers (2007) 54, 727–739. doi:10.1057/palgrave.imfsp.9450023

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  • Aleš Bulíř & A Javier Hamann, 2007. "Volatility of Development Aid: An Update," IMF Staff Papers, Palgrave Macmillan, vol. 54(4), pages 727-739, November.
    • Handle: RePEc:pal:imfstp:v:54:y:2007:i:4:p:727-739
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    Citations

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    Cited by:

    1. Christopher Kilby, 2011. "Informal influence in the Asian Development Bank," The Review of International Organizations, Springer, vol. 6(3), pages 223-257, September.
    2. Qiaoqiao Liu & Zenggang Li, 2022. "Aid instability, aid effectiveness and economic growth," Development Policy Review, Overseas Development Institute, vol. 40(1), January.
    3. Christopher Kilby, 2013. "An Empirical Assessment of Informal Influence in the World Bank," Economic Development and Cultural Change, University of Chicago Press, vol. 61(2), pages 431-464.
    4. Agénor, Pierre-Richard & Aizenman, Joshua, 2010. "Aid volatility and poverty traps," Journal of Development Economics, Elsevier, vol. 91(1), pages 1-7, January.
    5. Martin C. Steinwand, 2015. "Foreign aid and political stability," Conflict Management and Peace Science, Peace Science Society (International), vol. 32(4), pages 395-424, September.
    6. John Thornton, 2014. "Does foreign aid reduce tax revenue? Further evidence," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 359-373, February.
    7. Panika Jain & Samaresh Bardhan, 2023. "Energy aid volatility across developing countries: a disaggregated sectoral analysis," International Economics and Economic Policy, Springer, vol. 20(3), pages 457-483, July.
    8. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.

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