The World Bank and the IMF have adopted a debt sustainability framework (DSF) to evaluate the risk of debt distress in Low Income Countries (LICs). At the core of the DSF are empirically-based thresholds for each of five different measures of the debt burden (the “debt threshold approach”...

This paper develops a new index which provides early warning signals of a growth crisis in the event of large external shocks in low-income countries. Multivariate regression analysis and a univariate signaling approach are used to map information from a parsimonious set of underlying policy,...

The exposure of low-income countries to natural disasters has a significant impact on food production and food security. This paper provides a framework for assessing a country's vulnerability to food crisis in the event of natural disasters. The paper finds that macroeconomic and structural...

This paper shows that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique Nash equilibrium, explaining aid fragmentation. This equilibrium may be inefficient even without fixed costs, and the inefficiency increases in the equality of donors'...

This paper explores the role of foreign aid and remittance inflows in the mitigation of the effects of food price shocks. Using a large sample of developing countries and mobilising dynamic panel data specifications, the econometric results yield two important findings. First, remittance and aid...

This paper focuses on the macroeconomic aspects of fiscal management in aid-receiving countries. Despite the declining share of aid in budgets of donor countries, aid continues to play an important role in many developing countries. The paper first discusses the implications of aid in the...

A low-income country such as Haiti that confronts an environment of diminishing aidinflows must assess tradeoffs among the available policy options: spending cuts,monetization, sales of debt, or use of foreign reserves. To provide the analytical tools forthis task, the paper draws from a set of...

This paper assesses whether conditionality in IMF-supported programs has helped offset the potential negative effect of foreign aid on tax revenues. The analysis - carried out on panel data covering 1993-2012 for 111 low- and middle-income countries - shows that growing use of revenue...

Foreign aid is a sizable source of government financing for several developing countries and its allocation matters for the conduct of fiscal policy. This paper revisits fiscal effects of shifts in aid dependency in 59 developing countries from 1960 to 2010. It identifies structural shifts in...

We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption — an increase in the current account deficit net of aid — delivering the same effects as...