When is aid destabilizing? Analysing profiles of aid flows in four low income countries

Abstract

The paper, building on the Chauvet and Guillaumont (2009) analysis of aid volatility, examines through country-case studies the cyclicality and stabilizing profiles of aid inflows. Chauvet and Guillaumont (2009) identified 4 different profiles of aid: Procyclical - Stabilizing, Procyclical - Destabilizing, Contracyclical – Stabilizing, and Contracyclical- Destabilizing. The authors analyse external and domestic factors explaining how these profiles occurred and what are their macroeconomics consequences and implications for aid management. This is part of the ‘Financial Volatility, Macroprudential Regulation and Economic Growth in Low-Income Countries’ project