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Aid and Income Stabilization
Author(s) -
Jeanneney S. Guillaumont,
Tapsoba S. JA.
Publication year - 2012
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2012.00657.x
Subject(s) - economics , volatility (finance) , consumption (sociology) , monetary economics , investment (military) , vulnerability (computing) , macroeconomics , dependency (uml) , public economics , finance , social science , computer security , systems engineering , sociology , politics , political science , computer science , law , engineering
The potential stabilization of output shocks through official assistance flows is investigated is this paper. It contributes to the current debate on aid instability and argues that official assistance might cope with exogenous output shocks in recipient countries and stabilize resources available for national expenditure, including consumption and investment. High aid dependency and vulnerability to output shocks positively affect the stabilization property of aid. Contrasting with the current literature, the paper documents that aid volatility is not a significant determinant of the stabilizing or destabilizing impact of aid.