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The Volatility of Aid

  • George Mavrotas
  • David Fielding

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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Paper provided by eSocialSciences in its series Working Papers with number id:3166.

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Date of creation: Nov 2010
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Handle: RePEc:ess:wpaper:id:3166
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  1. 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).
  2. Tony Addison & George Mavrotas & Mark McGillivray, 2010. "Aid, Debt Relief and New Sources of Finance for Meeting the Millennium Development Goals," Working Papers id:2592, eSocialSciences.
  3. Stephane Pallage & Michel Robe, 1998. "Foreign Aid and the Business Cycle," Cahiers de recherche CREFE / CREFE Working Papers 63, CREFE, Université du Québec à Montréal.
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  6. 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.
  7. 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).
  8. Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
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  11. 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.
  12. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  13. Sanjeev Gupta & Benedict Clements & Erwin R. Tiongson, 2004. "Foreign Aid and Consumption Smoothing: Evidence from Global Food Aid," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 379-390, 08.
  14. 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.
  15. Tito Cordella & Giovanni Dell'Ariccia, 2007. "Budget Support Versus Project Aid: A Theoretical Appraisal," Economic Journal, Royal Economic Society, vol. 117(523), pages 1260-1279, October.
  16. 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).
  17. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 03/88, International Monetary Fund.
  18. 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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