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Aid, Volatility and Growth Again: When Aid Volatility Matters and When It Does Not

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  • Lisa Chauvet
  • Patrick Guillaumont

Abstract

In previous papers we have argued that aid is likely to mitigate the negative effects of external shocks on economic growth (i.e., aid is more effective in countries that are more vulnerable to external shocks). Recently an important debate has emerged about the possible negative effects of aid volatility itself. However, the cushioning effect of aid may involve some volatility in aid flows, which then is not necessarily negative for growth. In this paper we examine to what extent the time profile of aid disbursements may contribute to an increase or a decrease of aid effectiveness.

Suggested Citation

  • Lisa Chauvet & Patrick Guillaumont, 2008. "Aid, Volatility and Growth Again: When Aid Volatility Matters and When It Does Not," WIDER Working Paper Series RP2008-78, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2008-78
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    More about this item

    Keywords

    Economic assistance and foreign aid; Economic development;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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