Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86796
Authors: 
Chervin, Michal
van Wijnbergen, Sweder
Year of Publication: 
2010
Series/Report no.: 
Tinbergen Institute Discussion Paper 10-002/2
Abstract: 
Foreign aid’s effectiveness in promoting economic growth remains mired in controversy.We examine the impact of the volatility of aid on economic growth, controlling for the level of aid. A four-year panel analysis is conducted encompassing 155 countries over the period 1966-2001. We find that once the volatility of aid is controlled for, aid has a positive impact on economic growth. Correspondingly, volatility of aid flows is found to be negatively related to growth. We found no significant link between investment and foreign aid, but a positive correlation between aid and consumption and a negative link between aid volatility and consumption. But our results also indicate that aid has become a source of volatility rather than insuring against it, and in that way may have become inimical to economic growth.
Subjects: 
foreign aid
volatility
economic growth
JEL: 
O4
O11
O19
Document Type: 
Working Paper

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