In previous papers the authors have argued that aid is likely to mitigate the negative effects of external shocks on economic growth (i.e. that aid is more effective in countries which are more vulnerable to external shocks). Recently an important debate has emerged about the possible negative...

The author examines the welfare implications of foreign aid within the framework of a two-period, two-country model of international trade. It is up to the donor country to decide what fraction of any given aid package is to be made available for the recipient's immediate consumption in period...

The author analyzes three issues in strategic donor-recipient interaction motivated by the complexity of the rationale underlying aid. The first is when we have several principals with conflicting objectives. Any one principal cannot offer high powered incentives to the agent to carry out his or...

Countries compete with one another for funds distributed by non-government organizations (NGOs). The authors consider a competition over poverty and governance conducted by a non-government organization trying to allocate its funds among potential recipient countries. In its decision-making the...

The authors investigate the macroeconomic challenges created by a surge in aid inflows. They develop an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid-where the central bank controls absorption, through monetary policy...

This paper looks at interactions between foreign development aid, economic reform, and public sector fiscal behavior. It proposes a model of the public sector fiscal response to aid inflows, which allows for changes in structural relationships due to an exogenously imposed program of economic...

The authors investigate the role of aid in mitigating the adverse effects of commodity export price shocks on growth in commodity-dependent countries. Using a large cross-country dataset, they find that negative shocks matter for short-term growth, while the ex ante risk of shocks does not seem...

The authors examine the impact of institutional quality and social capital on aid effectiveness. They find strong evidence that social capital and institutions enhance aid effectiveness. Moreover, once they account for the role of social capital and institutions, the impact of policies tends to...

This is an introduction to the Special Issue. The author provides the background to the development aid arena-to which there clearly exists a pressing need to evaluate progress to date-and introduces and links together the papers that constitute the Special Issue. Copyright 2009 UNU-WIDER....

This paper examines the properties of alternative monetary policy rules in response to large aid surges in low-income countries characterized by incomplete capital market integration and currency substitution. Using a dynamic stochastic general equilibrium model, it is shown that simple monetary...