Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?

Predictability of aid: aid recipients and donors alike frequently voice concerns about the lack of predictability of development aid. The existing literature often treats predictability and volatility as closely related, but this paper shows that they are conceptually and empirically distinct. Using...

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Main Authors:	Celasun, Oya, Walliser, Jan
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	International Linkages to Development Role of International Organizations O190
Online Access:	http://hdl.handle.net/10986/5504

id	okr-10986-5504
recordtype	oai_dc
spelling	okr-10986-55042021-04-23T14:02:22Z Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness? Celasun, Oya Walliser, Jan International Linkages to Development Role of International Organizations O190 Predictability of aid: aid recipients and donors alike frequently voice concerns about the lack of predictability of development aid. The existing literature often treats predictability and volatility as closely related, but this paper shows that they are conceptually and empirically distinct. Using two main data sources, we demonstrate that, contrary to common belief, lack of predictability typically involves managing both aid shortfalls and windfalls, and hampers aid management even in countries with stable implementation of macroeconomic policies. Although regression analysis of the sources of low predictability for a large panel picks up two indicators that could be seen as justifying unexpected revisions in aid disbursements, a large unexplained residual remains for which we cannot identify a link between low predictability and aid effectiveness concerns by donors. Using detailed data from IMF programmes, we demonstrate the significant costs of low predictability of budget aid in relatively well performing recipient countries. Deviations of disbursed from expected budget aid of more than 1% of GDP on average are absorbed asymmetrically: aid shortfalls lead to debt accumulation and cuts in investment spending, whereas aid windfalls help reduce debt but also lead to additional government consumption. Lack of predictability thus shifts government spending from investment to consumption activities. 2012-03-30T07:33:09Z 2012-03-30T07:33:09Z 2008 Journal Article Economic Policy 02664658 http://hdl.handle.net/10986/5504 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	International Linkages to Development Role of International Organizations O190
spellingShingle	International Linkages to Development Role of International Organizations O190 Celasun, Oya Walliser, Jan Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Predictability of aid: aid recipients and donors alike frequently voice concerns about the lack of predictability of development aid. The existing literature often treats predictability and volatility as closely related, but this paper shows that they are conceptually and empirically distinct. Using two main data sources, we demonstrate that, contrary to common belief, lack of predictability typically involves managing both aid shortfalls and windfalls, and hampers aid management even in countries with stable implementation of macroeconomic policies. Although regression analysis of the sources of low predictability for a large panel picks up two indicators that could be seen as justifying unexpected revisions in aid disbursements, a large unexplained residual remains for which we cannot identify a link between low predictability and aid effectiveness concerns by donors. Using detailed data from IMF programmes, we demonstrate the significant costs of low predictability of budget aid in relatively well performing recipient countries. Deviations of disbursed from expected budget aid of more than 1% of GDP on average are absorbed asymmetrically: aid shortfalls lead to debt accumulation and cuts in investment spending, whereas aid windfalls help reduce debt but also lead to additional government consumption. Lack of predictability thus shifts government spending from investment to consumption activities.
format	Journal Article
author	Celasun, Oya Walliser, Jan
author_facet	Celasun, Oya Walliser, Jan
author_sort	Celasun, Oya
title	Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
title_short	Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
title_full	Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
title_fullStr	Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
title_full_unstemmed	Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?
title_sort	predictability of aid: do fickle donors undermine aid effectiveness?
publishDate	2012
url	http://hdl.handle.net/10986/5504
_version_	1764395289924337664

Predictability of Aid: Do Fickle Donors Undermine Aid Effectiveness?

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