We develop a simple macroeconomic model that assesses the effects of higher foreign aid on output growth and other macroeconomic variables, including the real exchange rate. The model is easily tractable and requires estimation of only a few basic parameters. It takes into account the impact of...

Countries that undertake serious and sustained programs of stabilization and structural adjustment should expect to attract significant new inflows of capital from donor countries and international institutions. While apparently beneficial, those flows can work at crosspurpose with other goals...