Zusammenfassung:
This study contributes to the attendant literature by bundling governance dynamics and focusing on foreign aid instability instead of foreign aid. We assess the role of foreign aid instabilit y on governance dynamics in fifty three African countries for the period 1996-2010. An autoregressive endogeneity-robust Generalized Method of Moments is employed. Instabilities are measured in terms of variance of the errors and standard deviations. Three main aid indicators are used, namely: total aid, aid from multilateral donors and bilateral aid. Principal Component Analysis is used to bundle governance indicators, namely: political governance (voice & accountability a nd political stability/no violence), economic governance (regulation quality and government effectiveness), institutional governance (rule of law and corruption-control) and general governance (political, economic and institutional governance). Our findings show that foreign aid instability increases governance standards, especially political and general governance. Poli cy implications are discussed.