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Aid Volatility, Policy and Development

Author

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  • John Hudson
  • Paul Mosley

    (Department of Economics, The University of Sheffield)

Abstract

Summary We build on Bulir and Hamann's analysis of aid volatility [Bulir, A., & Hamann, J. (2003). Aid volatility: An empirical assessment. IMF Staff Papers, 50(1), 64-89; Bulir, A., & Hamann, J. (2008) Volatility of development aid: From the frying pan into the fire? Washington DC: IMF, paper submitted to this Special Section], showing that the conclusions reached depend on the dataset used. Their argument that the poorest countries have the highest volatility appears not to be correct. The impact of volatility on growth is negative overall, but differs between positive and negative volatility. The mix between "responsive" components of aid, for example, programme aid, and "proactive" components, for example, technical assistance, is important. Finally, we conclude that measures which increase trust between donor and recipient, and reductions in the degree of donor "oligopoly," reduce aid volatility without obviously reducing its effectiveness.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • John Hudson & Paul Mosley, 2007. "Aid Volatility, Policy and Development," Working Papers 2007015, The University of Sheffield, Department of Economics, revised Oct 2007.
    • Handle: RePEc:shf:wpaper:2007015
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    References listed on IDEAS

    as
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    2. Eifert, Benn & Gelb, Alan, 2005. "Improving the dynamics of aid : towards more predictable budget support," Policy Research Working Paper Series 3732, The World Bank.
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    More about this item

    Keywords

    aid volatility; disasters; trust;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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