This paper studies the impact of aid volatility in a two-period model where production may occur with either a … modern technology to be used. The possibility of a poverty trap induced by high aid volatility is first examined in a …-period contingency fund) financed through taxation. An increase in aid volatility is shown to raise the optimal contingency fund. But if …

markets on the cost of macroeconomic volatility there. We find that macroeconomic volatility has a potentially large impact on … industries with costly capacity, the multinationals would tend to invest in the more stable emerging markets. Higher volatility …

This paper examines the effect of volatility on the costs and benefits of financial market integration. The basic …

volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with … revenue lost in adverse states of nature. Higher volatility of producers' productivity shocks increases both financial spreads … volatility are non-linear. Higher volatility does not impose any welfare cost for countries characterized by relatively low …

This study uncovers a statistically significant negative correlation between volatility and private investment over the … volatility measures related to domestic policies or to external factors. As the various volatility measures tend to be positively … correlated, we do not claim to identify a unique measure as the dominant source of volatility. Instead, we demonstrate that for a …

This paper shows that volatility induces adverse first order welfare effects in countries excluded from the global … volatility. We identify the parameters determining the magnitude of the loss -- it is proportional to the autocorrelation of … shocks, to volatility (as measured by the standard deviation of shocks), and to the degree of product differentiation (as …

domestic investment and foreign direct investment (FDI), and the correlation between exchange rate volatility and investment … exchange rate volatility under a flexible exchange rate is shown to depend on the nature of the shocks. If the dominant shocks … correlation between exchange rate volatility and the level of investment …