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Are Foreign Aid and Remittance Inflows a Hedge Against Food Price Shocks?

This paper explores the role of foreign aid and remittance inflows in the mitigation of the effects of food price shocks. Using a large sample of developing countries and mobilising dynamic panel data specifications, the econometric results yield two important findings. First, remittance and aid inflows significantly dampen the effect of food price shocks in the most vulnerable countries. Second, a lower remittance-to-GDP ratio is required in order to fully absorb the effects of food price shocks compared to the corresponding aid-to-GDP ratio.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/67.

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Length: 28
Date of creation: 01 Mar 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/67
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  1. Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
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  3. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  4. Mohapatra, Sanket & Joseph, George & Ratha, Dilip, 2009. "Remittances and natural disasters : ex-post response and contribution to ex-ante preparedness," Policy Research Working Paper Series 4972, The World Bank.
  5. Frankel, Jeffrey, 2010. "Are Bilateral Remittances Countercylical?," Working Paper Series rwp10-037, Harvard University, John F. Kennedy School of Government.
  6. Paul J. Burke & Andrew Leigh, 2010. "Do output contractions trigger democratic change?," CEPR Discussion Papers 633, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
  8. Christian Hubert EBEKE, 2011. "Remittances, Countercyclicality, Openness and Government Size," Discussion Papers (REL - Recherches Economiques de Louvain) 2011044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  9. Jean-Louis Combes & Christian Ebeke, 2011. "Remittances and Household Consumption Instability in Developing Countries," Working Papers halshs-00552245, HAL.
  10. Era Dabla-Norris & Camelia Minoiu & Luis-Felipe Zanna, 2010. "Business Cycle Fluctuations, Large Shocks, and Development Aid; New Evidence," IMF Working Papers 10/240, International Monetary Fund.
  11. Antonio David, 2010. "How Do International Financial Flows to Developing Countries Respond to Natural Disasters?," IMF Working Papers 10/166, International Monetary Fund.
  12. Roland Craigwell & Mahalia Jackman & Winston Moore, 2010. "Economic volatility and remittances," International Journal of Development Issues, Emerald Group Publishing, vol. 9(1), pages 25-42, April.
  13. Ilene Grabel, 2009. "Remittances: Political Economy and Developmental Implications," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 38(4), pages 86-106, December.
  14. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances; An Automatic Output Stabilizer?," IMF Working Papers 09/91, International Monetary Fund.
  15. Erik Lueth & Marta Ruiz-Arranz, 2007. "Are workers' remittances a hedge against macroeconomic shocks? The case of Sri Lanka," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 14(1), pages 25-39, June.
  16. Gupta, Sanjeev & Pattillo, Catherine A. & Wagh, Smita, 2009. "Effect of Remittances on Poverty and Financial Development in Sub-Saharan Africa," World Development, Elsevier, vol. 37(1), pages 104-115, January.
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