A windfall of foreign aid or natural resource revenue faces government with choices of how to manage public borrowing, public asset accumulation, and the distribution of funds to households (across time and household types), particularly when the windfall is both anticipated and temporary. These...

Many countries have failed to use natural resource wealth to promote growth and development. They have been damaged by volatility of revenues, have failed to save a sufficiently high proportion of their resource revenues and failed to make high return investments to support diversification of...

The paper surveys the interactions between aid and trade, distinguishing between policies and outcomes as well as between various instruments. It first discusses the theoretical literature, focusing on the causal impact of aid on the recipient’s welfare via the trade channel, before turning to...

Charitable donations by private individuals and firms can help fund the Millennium Development Goals. What are the prospects for increasing donations for international development, whether from small-scale donors, the super-rich (as in the recent gifts by Bill Gates and Ted Turner), or the...

Real exchange rates appear to present a specific behaviour in the early phase of transition: they are largely unaffected by nominal exchange rate movements and exhibit trend appreciation. The model presented here describes the transition process as the emergence of two new (traded and non-traded...

This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the non-robust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using...

This paper provides instrumental variables estimates of the response of aggregate private consumption to transitory output shocks in poor countries. To identify exogenous, unanticipated, idiosyncratic and transitory variations in national output we use year-to-year variations in rainfall as an...

We investigate the effects of short-term political motivations on the effectiveness of foreign aid. Donor countries’ political motives might reduce the effectiveness of conditionality, channel aid to inferior projects, reduce the aid bureaucracy’s effort, and change the power structure in...

The demand for accountability in “Aid-for-Trade” (AFT) is increasing but monitoring has focused on case-studies and impressionistic narratives. The paper reviews recent evidence from a wide range of studies, recognizing that a multiplicity of approaches is needed to learn what works and what...

We introduce a new `supply-push' instrument for foreign aid, to be used together with an instrumental variable estimator that filters out unobserved common factors. We use this instrument to study the effects of aid on macroeconomic ratios, and especially the ratios of consumption, investment,...