Pallage, Stéphane; Robe, Michel A.; Bérubé, Catherine - In: IMF Staff Papers 53 (2006), pp. 5-5
This paper quantifies the potential of foreign aid as an insurance mechanism against macroeconomic shocks. Within a dynamic model of aid flows between two endowment economies, we show that at least three-fourths of the large welfare costs of macroeconomic fluctuations in poor countries could be...