At the very time that professional skepticism concerning the effectiveness of foreign aid has reached new heights, donors seem to be ready to substantially increase the volume of aid they are willing to make available. This paper attempts to address this paradox by first examining the record of...

The Millennium Development Goals (MDGs) have lofty expectations regarding the impact of official development aid. Are these expectations valid? This paper surveys the literature on aid and growth. It finds that practically all aid studies since the late 1990s conclude that aid increases economic...

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...

The ultimate measure of aid effectiveness is how aid affects the lives of poor people in developing countries. The huge literature on aid’s macroeconomic impact has remarkably little to say on this topic, and less still in terms of practical advice to government officials and aid...