Does Aid Mitigate External Shocks?

Paul Collier and Benedikt Goderis

No DP2008-06, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper investigates 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, we find that negative shocks matter for short-term growth, while the ex ante risk of shocks does not seem to matter. We also find that both the level of aid and the flexibility of the exchange rate substantially lower the adverse growth effect of shocks.

Keywords: Economic assistance and foreign aid; International trade; Prices; Primary commodities (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (12)

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