Global food aid is considered a critical consumption smoothing mechanism in many countries. However, its record of stabilizing consumption has been mixed. This paper examines the cyclical properties of food aid with respect to food availability in recipient countries, with a view to assessing...

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...

We quantify foreign aid's potential as an insurance mechanism against macroeconomic shocks. Within a dynamic model of aid flows between two endowment economies, we show that at least three fourths of the large welfare costs of macroeconomic fluctuations in poor countries could be alleviated by a...

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 the business cycle of recipient countries. This pattern is puzzling in that it reinforces recipients' already strong and...

In this paper, we argue that it would be fruitful to revisit foreign aid's potential as an insurance mechanism against macroeconomic shocks. In a simple model of aid flows between two endowment economies, we show that at least three fourths of the large welfare costs of macroeconomic...

This paper points out an empirical failing of real business cycle models in which unemployment is endogenized through a matching function. One can easily choose a calibration to make the cyclical fluctuation in unemployment as large in the model as it is in the data, or to make the response of...