This paper uses the cointegrated vector autoregressive (CVAR) model to assess the dynamic relationship between foreign aid inflows, public expenditure, revenue and domestic borrowing in Ethiopia. It departs from the existing literature by using a unique quarterly fiscal dataset (1993-2008) and...

This paper documents that developing countries with opaque institutions receive procyclical development aid and procyclical promises of future aid while developing countries with transparent institutions receive countercyclical aid. It provides a dynamic equilibrium model of optimal aid policy...

This article should serve as an introduction into cat-bonds, how they work and what advantages they have in portfolio construction.It also the possibility merging two familiar concepts, cat-bonds and Public Private Partnership (PPP). By doing so, infrastructure could be financed in a way that...

The positive impact of foreign aid is limited by the erratic behavior of aid flows. The introduction in 1999 of various initiatives anchored in Poverty Reduction Strategy Papers (PRSPs) which were aimed at strengthening coordination among donors, improving the design of financial support...

Foreign Direct Investments (FDIs) is crucial in spurring economic growth and poverty reduction in developing countries, especially in the context of globalization and liberalization. For that reason there is in existence, intense competition among developed and developing countries to attract...

The positive impact of foreign aid is limited by the erratic behavior of aid flows. The introduction in 1999 of various initiatives anchored in Poverty Reduction Strategy Papers (PRSPs) which were aimed at strengthening coordination among donors, improving the design of financial support...

Managing and identifying risks are a key challenge for Low Income Countries (LICs), which are extremely vulnerable to exogenous shocks. However, the use of risk management tools by developing countries is quite limited. The paper discusses in which ways aid could strengthen the capacity of LICs...

Official development assistance is a key source of external finance in many developing countries. A striking feature of these aid flows is their positive correlation with business cycles in recipient countries. This pattern is puzzling in that it reinforces recipients' already strong and costly...

We document the real business cycle properties of foreign aid to poor countries. We show that aid exhibits the following empirical regularities over a twenty-five year period. First, it represents a significant source of income for the recipients. Second, it is very volatile--two to three times...

In this paper, we document empirical regularities in the foreign aid flows to developing countries over the last three decades. In spite of a large body of literature on foreign aid and its impact on recipients, surprisingly little is known about its business cycle characteristics. We show that,...