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A structural analysis of foreign aid to ten Mediterranean countries

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  • Larru, Jose Maria

Abstract

Although the literature on aid effectiveness is vast, most of it is based on cross-country studies and does not address the Mediterranean countries as a especial group. To fill this gap, this paper describes the main structural characteristics of overseas development assistance (ODA). ODA is analyzed by country, by donor, and by sector for 1960-2007 in ten Mediterranean countries. Different patterns among recipient countries are found, but a proliferation and concentration of donors is confirmed. A positive correlation between shocks in GDP and ODA is found when the whole sample of countries is analyzed, but when the Mediterranean economies are individually considered, the pro-cyclicality of the ODA is not confirmed, except in the case of Lebanon. FDI, remittances and ODA flows are compared. The three variables are positively correlated. ODA and remittances are indeed less volatile than FDI flows. But, whereas remittances are stable and strategic to Egypt, Lebanon and Turkey, ODA flows to Syria and the Palestinian territories are higher than remittances in volume, but more volatile. Egypt and Turkey are the main destinations of FDI to the region. Finally, it is shown that ODA does not offset the shocks of FDI or remittances.

Suggested Citation

  • Larru, Jose Maria, 2009. "A structural analysis of foreign aid to ten Mediterranean countries," MPRA Paper 17865, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17865
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    File URL: https://mpra.ub.uni-muenchen.de/17865/2/MPRA_paper_17865.pdf
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    References listed on IDEAS

    as
    1. Rene Teboul & Emmanuelle Moustier, 2001. "Foreign aid and economic growth: the case of the countries south of the Mediterranean," Applied Economics Letters, Taylor & Francis Journals, vol. 8(3), pages 187-190.
    2. Pallage, Stephane & Robe, Michel A, 2001. "Foreign Aid and the Business Cycle," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 641-672, November.
    3. Eric Neumayer, 2003. "What Factors Determine the Allocation of Aid by Arab Countries and Multilateral Agencies?," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 134-147.
    4. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    5. Emmanuel Frot & Javier Santiso, 2008. "Development Aid and Portfolio Funds: Trends, Volatility and Fragmentation," OECD Development Centre Working Papers 275, OECD Publishing.
    6. Agénor, Pierre-Richard & Aizenman, Joshua, 2010. "Aid volatility and poverty traps," Journal of Development Economics, Elsevier, vol. 91(1), pages 1-7, January.
    7. David Fielding & George Mavrotas, 2008. "Aid Volatility and Donor-Recipient Characteristics in 'Difficult Partnership Countries'," Economica, London School of Economics and Political Science, vol. 75(299), pages 481-494, August.
    8. Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-4.
    9. Eduardo Borensztein & Julia Cagé & Daniel Cohen & Cécile Valadier, 2008. "Aid Volatility and Macro Risks in Low-Income Countries," OECD Development Centre Working Papers 273, OECD Publishing.
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    More about this item

    Keywords

    aid; FDI; pro-cyclicality; remittances; volatility;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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