Business Cycle Fluctuations, Large Shocks, and Development Aid: New Evidence
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
We examine the cyclical properties of development aid using bilateral data for 22 donors and over 100 recipients during 1970?2005. We find that bilateral aid flows are on average procyclical with respect to business cycles in donor and recipient countries. However, they become countercyclical when recipient countries face large adverse shocks to the terms-of-trade or growth collapses-thus playing an important cushioning role. Aid outlays contract sharply during severe donor economic downturns; this effect is magnified by higher public debt levels. Additionally, bilateral aid flows are higher in the presence of IMF programs and are more countercyclical for recipient countries with stronger institutions.
Series:
Working Paper No. 2010/240
Subject:
Aid flows Business cycles Development assistance Foreign aid Output gap
English
Publication Date:
October 1, 2010
ISBN/ISSN:
9781455209408/1018-5941
Stock No:
WPIEA2010240
Pages:
39
Please address any questions about this title to publications@imf.org