{
  "title": "Business Cycle Fluctuations, Large Shocks, and Development Aid: New Evidence",
  "publication": "IMF Working Papers, October 1, 2010",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/business-cycle-fluctuations-large-shocks-and-development-aid-new-evidence-24303",
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  "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.",
  "sections": [
    {
      "heading": "Data and scope",
      "content": "- Bilateral data for 22 donors and over 100 recipients during 1970?2005.\n- Working Paper authors: Era Dabla-Norris, Camelia Minoiu, Luis-Felipe Zanna.\n- Publication date: October 1, 2010.\n- Series: Working Paper No. 2010/240; Pages: 39; Issue: 240; ISBN: 9781455209408; ISSN: 1018-5941; DOI: https://doi.org/10.5089/9781455209408.001."
    },
    {
      "heading": "Key empirical findings",
      "content": "- On average, bilateral aid flows are procyclical with respect to business cycles in donor and recipient countries.\n- Bilateral aid becomes countercyclical when recipient countries face large adverse shocks:\n  - Specifically, countercyclical responses occur during large adverse shocks to the terms-of-trade or growth collapses, indicating an important cushioning role for aid.\n- Aid outlays contract sharply during severe donor economic downturns.\n  - The contraction effect is magnified by higher public debt levels in donor countries.\n- Bilateral aid flows are higher in the presence of IMF programs.\n- Bilateral aid flows are more countercyclical for recipient countries with stronger institutions."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Aid flows, Business cycles, Development assistance, Foreign aid, Output gap.\n- Keywords: aid outlay, country, donor output gap, recipient country, recipient cycle, WP."
    },
    {
      "heading": "Implications (policy-relevant)",
      "content": "- Development aid can provide countercyclical cushioning in recipient countries subject to large adverse shocks to terms-of-trade or growth collapses.\n- Fiscal vulnerabilities in donors (higher public debt) amplify aid reductions during severe donor downturns, suggesting a risk to aid reliability in crises.\n- IMF program presence is associated with higher bilateral aid flows, indicating potential complementarities between IMF engagement and bilateral assistance.\n- Strengthening recipient-country institutions may enhance the countercyclical properties of bilateral aid.\n\nBusiness Cycle Fluctuations, Large Shocks, and Development Aid: New Evidence — Era Dabla-Norris, Camelia Minoiu, Luis-Felipe Zanna; IMF Working Papers, October 1, 2010.\n\n---\n\n Content in this bundle\n\n- wp10240 - References\n  - wp10240 - References (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp10240 - References (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/business-cycle-fluctuations-large-shocks-and-development-aid-new-evidence-24303"
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    "Authors: Era Dabla-Norris, Camelia Minoiu, Luis-Felipe Zanna",
    "Published: October 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781455209408.001",
    "Bilateral data for 22 donors and over 100 recipients during 1970?2005.",
    "Working Paper authors: Era Dabla-Norris, Camelia Minoiu, Luis-Felipe Zanna.",
    "Publication date: October 1, 2010.",
    "Series: Working Paper No. 2010/240; Pages: 39; Issue: 240; ISBN: 9781455209408; ISSN: 1018-5941; DOI: https://doi.org/10.5089/9781455209408.001.",
    "On average, bilateral aid flows are procyclical with respect to business cycles in donor and recipient countries.",
    "Bilateral aid becomes countercyclical when recipient countries face large adverse shocks:",
    "Aid outlays contract sharply during severe donor economic downturns.",
    "Bilateral aid flows are higher in the presence of IMF programs.",
    "Bilateral aid flows are more countercyclical for recipient countries with stronger institutions.",
    "Subject: Aid flows, Business cycles, Development assistance, Foreign aid, Output gap.",
    "Keywords: aid outlay, country, donor output gap, recipient country, recipient cycle, WP.",
    "Development aid can provide countercyclical cushioning in recipient countries subject to large adverse shocks to terms-of-trade or growth collapses.",
    "Fiscal vulnerabilities in donors (higher public debt) amplify aid reductions during severe donor downturns, suggesting a risk to aid reliability in crises.",
    "IMF program presence is associated with higher bilateral aid flows, indicating potential complementarities between IMF engagement and bilateral assistance.",
    "Strengthening recipient-country institutions may enhance the countercyclical properties of bilateral aid.",
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