Journal Special Issue
Macroeconomic Perspectives on Aid
Much criticism of aid rests on no evidence at all, on out-of-date studies (many of which are methodologically weak) or on a misunderstanding of causation and country context. Many critics correlate weak or negative growth with aid flows, without much (if any) attention to the direction of causation, the overall determinants of growth (of which aid is just one) or the counter-factual to aid. For many critics it seems self-evident that a dollar of aid will reduce a government’s incentive to collect a dollar of tax, without considering the strong support that donors have given to domestic revenue mobilisation. Many critics cite ‘Dutch Disease’ as an inevitable consequence of aid, without recognising that the phenomenon can be contained by policy and by donor investment in the economy’s supply side (through, for example, infrastructure and human capital formation).
Research methodology must take on board these complexities and contexts of aid and its impact. Otherwise, policy in both donor and partner countries will be ill-served. Many of these issues are macroeconomic in nature: the impact on growth; the fiscal impact; the construction of macroeconomic scenarios in which aid provides finance (including the climate dimension); and the respective roles of fiscal, monetary, and exchange-rate policies in relation to aid inflows (with policy lessons for other types of flows including remittances, private capital and resource earnings).
This Special Issue explores macroeconomic effects of aid from various perspectives through a blend of studies, both conceptual and empirical in nature. The overall aim is to enhance the understanding of the macroeconomic dimensions of aid in the policy and research communities, and to inspire further innovative work in this important area.