Foreign Aid and the Business Cycle
Michel A. Robe
American University - Kogod School of Business
University of Quebec at Montreal - Department of Economics; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)
CREFE Research Paper No. 63
We document the real business cycle properties of foreign aid to poor countries. We show that aid exhibits the following empirical regularities over a twenty-five year period. First, it represents a significant source of income for the recipients. Second, it is very volatile--two to three times as volatile as output. Third, for the vast majority of recipient countries in our sample, aid disbursements are procyclical. Whatever the intended purpose of aid, this procyclicality suggests that aid ends up acting as a reward (punishment) for good (bad) economic performance. In contrast, there is no clear pattern of procyclicality with the business cycle of the donors.
JEL Classification: E32, F35working papers series
Date posted: September 19, 1998
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.359 seconds