Volatility of Development Aid: From the Frying Pan into the Fire?
IMF Working Papers, March 1, 2006
Source details
- Canonical URL
- Volatility of Development Aid: From the Frying Pan into the Fire?
Other formats
Bibliographic details
- Authors: A. J Hamann
- Published: March 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863253.001
Summary findings
- The positive impact of foreign aid is limited by the erratic behavior of aid flows.
- The introduction in 1999 of various initiatives anchored in Poverty Reduction Strategy Papers (PRSPs) — aimed at strengthening coordination among donors, improving the design of financial support programs, and improving domestic records of policy implementation — should have led to an improvement in the time series properties of aid flows.
- "We find no evidence of any fundamental changes in the way aid has been delivered in the past five years."
- "If anything, aid volatility has worsened somewhat and the information value of long-term lending commitments has declined."
Interpretation and implications
- The observed persistence (and possible worsening) of aid volatility implies that the main causes of volatility and unpredictability of aid, and the broader issue of macroeconomic instability in low-income countries, have not been addressed in a systematic manner by the donor community.
- The decline in the information value of long-term lending commitments suggests reduced predictability of future aid disbursements for recipient-country planning.
Subject focus and keywords
- Subject: Aid flows, Development assistance, Loans, Procyclicality, Purchasing power parity
- Keywords: aid disbursement, aid volatility, C-to-D ratio, GDP shock, revenue series, shocks equivalent, WP