Working Paper 286 - Climatic Shocks and Food Security The Role of Foreign Aid

Little is known about the role that foreign aid can play in dampening the effects of climate change. This paper investigates the role of aid in mitigating the adverse effects of climatic shocks on food security in developing countries. Because foreign aid is an important source of revenue for developing countries, it can enable them to face climatic shocks by mobilizing or stabilizing resources for the financing of agriculture production or food imports. Our results show that foreign aid dampens the effect of climatic shocks on food security. Moreover, the dampening effect is higher for countries that are vulnerable to food price shocks. This result suggests that foreign aid should be increased in developing countries that are both vulnerable to food price shocks and affected by climatic shocks.