We develop an overlapping generations model of a developing economy in which ‘culture’ and technology interact to determine savings, investment and growth. Investment is assumed to involve intermediation or other costs which may, in each period, result in either of two stable equilibria for...

This paper presents a dynamic game of strategic delegation between a principal and an agent. The principal can choose between two organizational designs: a traditional hierarchy where she retains authority over the choice of projects to be implemented or a delegation where she allows her agent...

A dynamic dependent-economy model is developed to investigate the role of the real exchange rate in determining the effects of foreign aid. If capital is perfectly mobile between sectors, untied aid has no longrun impact on the real exchange rate. A decline in the traded sector occurs because...

This paper studies the spending and absorption of aid in PRGF-supported programs, verifies whether the use aid is programmed to be smoothed over time, and analyzes how considerations about macroeconomic stability influence the programmed use of aid. It finds that PRGF-supported programs allow...

Foreign aid flows to poor, aid-dependent economies are highly volatile and pro-cyclical. Shortfalls in aid coincide with shortfalls in GDP and government revenues. This increases the consumption volatility in aid dependent countries, thereby causing substantial welfare losses. This paper finds...

This paper focuses on the macroeconomic aspects of fiscal management in aid-receiving countries. Despite the declining share of aid in budgets of donor countries, aid continues to play an important role in many developing countries. The paper first discusses the implications of aid in the...

This paper studies how macroeconomic policies can help offset two unintended and undesirable features of foreign aid: its volatility and Dutch disease. We present evidence that aid volatility augments trade balance volatility and that foreign aid, with the important exception of years of adverse...

The volume of foreign aid has increased during the last four decades, albeit with interruptions in certain years. Over time, the major recipients have changed: while the share of aid to Asia has diminished since the 1980s, that destined for sub-Saharan Africa has grown. There is some evidence...

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) which were aimed at strengthening coordination among donors, improving the design of financial support...