The effects of development aid have been extensively discussed, and the extent to which aid has been effective in achieving its goals is widely disputed. At the same time, several studies and theorists point towards the unintended and potentially negative effects of aid. This working paper gives...

The impact of aid inflows on relative prices and output is ambiguous. Aid inflows that increase domestic expenditure are likely to cause real exchange rate appreciation, ceteris paribus. However, if this expenditure raises the capital stock in the traded goods sector, then output in this sector...

While we know a lot about how countries become prosperous, we have only begun to understand how aid contributes to economic growth and poverty reduction. The development record is mixed and no robust association between the volume of aid and development performance has been discovered. The...