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Business Cycle Fluctuations, Large Macroeconomic Shocks, and Development Aid. In: "Aid Policy and the Macroeconomic Management of Aid", Edited by Tony Addison and Finn Tarp. World Development, (2015)
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BibTeX
@MISC{Dabla-Norris15businesscycle,
author = {Era Dabla-Norris and Camelia Minoiu and Luis-Felipe Zanna},
title = {Business Cycle Fluctuations, Large Macroeconomic Shocks, and Development Aid. In: "Aid Policy and the Macroeconomic Management of Aid", Edited by Tony Addison and Finn Tarp. World Development,},
year = {2015}
}
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Abstract
Abstract. -We examine the cyclical properties of development aid using bilateral data for 22 donors and 113 recipients during 1970-2005. We find that bilateral aid flows are on average procyclical with respect to the business cycle in both donor and recipient countries. While aid outlays contract sharply during severe downturns in donor countries, they rise steeply when aid-receiving countries experience large adverse shocks. Our findings suggest that development aid may play an important cushioning role in developing countries, but only during times of severe macroeconomic stress. Our results are robust to alternate definitions of aid flows, specifications, and estimation techniques.
