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The Impacts of Donor Financial Crises on the Magnitude of Bilateral and Multilateral Foreign Aid

Author

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  • Mascarenhas , Raechelle

    (Willamette University, U.S.A.)

Abstract

The global financial crises that started in 2007 had a significant impact on countries across the world, including countries that contribute to foreign aid. Using a panel of 24 donor countries over the time period 1977-2018, this paper analyzes the impact of systemic banking crises on foreign aid flows through direct bilateral transfers to developing countries and channeled through multilateral institutions. The study finds that multilateral aid experiences statistically significant declines after donor financial crises and these declines are more severe and prolonged than for bilateral aid, which often serves as a tool to pursue the donors’ strategic interests. The share of tied bilateral aid, which often benefits businesses and special interest groups in the donor country, increases in the years following a systemic banking crisis.

Suggested Citation

  • Mascarenhas , Raechelle, 2025. "The Impacts of Donor Financial Crises on the Magnitude of Bilateral and Multilateral Foreign Aid," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 50(1), pages 23-43, March.
    • Handle: RePEc:ris:jecdev:0106
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    More about this item

    Keywords

    Financial Crisis; Foreign Aid; Bilateral; Multilateral; Tying Aid;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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