Does Aid Mitigate External Shocks?Paul Collier and Benedikt Goderis () Review of Development Economics, 2009, vol. 13, issue s1, pages 429-451 Abstract: 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 to matter. They also find that both the level of aid and the flexibility of the exchange rate substantially lower the adverse growth effect of shocks. While the mitigating effect of aid is significant in both countries with pegs and countries with floats, the effect seems to be smaller for the latter, suggesting that aid and exchange rate flexibility are partly substitutes. They investigate whether aid has historically been targeted at shock-prone countries, but find no evidence that this is the case. This suggests that donors could increase aid effectiveness by redirecting aid toward countries with a high incidence of commodity export price shocks. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. Date: 2009 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:bla:rdevec:v:13:y:2009:i:s1:p:429-451 Ordering information: This journal article can be ordered from Access Statistics for this article Review of Development Economics is edited by E. Kwan Choi More articles in Review of Development Economics from Blackwell Publishing |
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