Reforming Aid: Toward More Predictable, Performance-Based Financing for Development

Reforming Aid: Toward More Predictable, Performance-Based Financing for Development

We explore ways of mitigating the costs of aid volatility: in particular, we show that these can be dramatically reduced by a flexible pre-commitment rule which adjusts flows in the case of drastic improvements or deteriorations in country performance ratings. Such a system can further reduce variab...

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Bibliographic Details
Main Authors: Eifert, Benn, Gelb, Alan
Format: Journal Article
Language:EN
Published: 2012
Subjects:
Foreign Aid F350
Macroeconomic Analyses of Economic Development O110
International Linkages to Development
Role of International Organizations O190
Online Access:http://hdl.handle.net/10986/5682
id okr-10986-5682
recordtype oai_dc
spelling okr-10986-56822021-04-23T14:02:23Z Reforming Aid: Toward More Predictable, Performance-Based Financing for Development Eifert, Benn Gelb, Alan Foreign Aid F350 Macroeconomic Analyses of Economic Development O110 International Linkages to Development Role of International Organizations O190 We explore ways of mitigating the costs of aid volatility: in particular, we show that these can be dramatically reduced by a flexible pre-commitment rule which adjusts flows in the case of drastic improvements or deteriorations in country performance ratings. Such a system can further reduce variability with only minor efficiency costs. Our simulations suggest that a buffer stock of the order of 50-100% of annual aid-financed spending might enable a corrective feedback loop, with the necessary buffer depending on the size and variability of aid flows. Our proposed mechanism is similar in principle to natural resource funds, which have worked well in some countries but not in others; we briefly discuss some issues in design and implementation. 2012-03-30T07:34:01Z 2012-03-30T07:34:01Z 2008 Journal Article World Development 0305750X http://hdl.handle.net/10986/5682 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 Foreign Aid F350
Macroeconomic Analyses of Economic Development O110
International Linkages to Development
Role of International Organizations O190
spellingShingle Foreign Aid F350
Macroeconomic Analyses of Economic Development O110
International Linkages to Development
Role of International Organizations O190
Eifert, Benn
Gelb, Alan
Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
relation http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description We explore ways of mitigating the costs of aid volatility: in particular, we show that these can be dramatically reduced by a flexible pre-commitment rule which adjusts flows in the case of drastic improvements or deteriorations in country performance ratings. Such a system can further reduce variability with only minor efficiency costs. Our simulations suggest that a buffer stock of the order of 50-100% of annual aid-financed spending might enable a corrective feedback loop, with the necessary buffer depending on the size and variability of aid flows. Our proposed mechanism is similar in principle to natural resource funds, which have worked well in some countries but not in others; we briefly discuss some issues in design and implementation.
format Journal Article
author Eifert, Benn
Gelb, Alan
author_facet Eifert, Benn
Gelb, Alan
author_sort Eifert, Benn
title Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
title_short Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
title_full Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
title_fullStr Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
title_full_unstemmed Reforming Aid: Toward More Predictable, Performance-Based Financing for Development
title_sort reforming aid: toward more predictable, performance-based financing for development
publishDate 2012
url http://hdl.handle.net/10986/5682
_version_ 1764395941737005056

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