International aid and financial crises in donor countries

This paper estimates how donor-country banking crises have affected aid flows in the past, using panel data from 24 donor countries between 1977 and 2010. We find that banking crises in donor countries are associated with a substantial additional fall in aid flows, beyond any income-related effects, at least in part because of the high fiscal costs of crisis and the debt hangover in the post-crisis periods. Aid flows from crisis-affected countries are estimated to fall by 28% or more (relative to the counterfactual) and to bottom out only about a decade after the banking crisis hits.

From a paper by Hai-Anh Dang, Stephen Knack, & F. Halsey Rogers. A draft is here.

Aid comes back and to a higher level . . .

Foreign Aid, Military Interventions, and Terrorism

Interesting ideas and charts in this paper by Jean-Paul Azam and Véronique Thelen, which looks at the link between aid and presence of U.S. troops in foreign countries and terrorist attacks. 

From the abstract 

. . . military intervention, as captured by the presence of US soldiers on the ground is counter-productive, as it increases the number of terrorist attacks both by source country and by host country. 

. . . rich countries, with the exception of Germany, as well as Bangladesh, Chile, India, Indonesia and Nigeria, produce much less attacks than they host. In contrast, Iran is exporting quite a lot of attacks while hosting fewer of them. P. 10.

From the conclusions

These findings strongly support the view that foreign aid and educational capital are the main inhibitors of transnational terrorist attacks by source country, while military interventions are robustly counter-productive. P. 24

If aid is important, questions remain about the best way to allocate it.
I do not find very clear the way the authors dealt with endogeneity.
HT: Jacob A. Jordaan

When a Poor Country is Also a Donor (Ref.: India)

It is puzzling that India, which has a large domestic constituency of people suffering from underdevelopment, chronic poverty and mal-governance, is emerging as an important aid donor. With the intension of understanding why poor countries provide foreign aid, this article is the first to econometrically analyze India’s aid allocation decisions. First, we utilize cross-sectional data on aid commitments by the Ministry of External Affairs to 125 developing countries, obtained in US dollars from AidData for the 2008-2010 period. Second, we compare India’s aid allocation with that of other donors. Our findings show that India’s aid allocation is partially in line with our expectations of the behavior of a “needy” donor. Commercial and political self-interests dominate India’s aid allocation. We find the importance of political interests to be significantly larger for India than for all donors of the Development Assistance Committee. Moreover, we find that countries which are closer geographically are favored, and that countries at a similar developmental stage are more likely to enter India’s aid program.

Source: Fuchs and Chaitanya Vadlamannati (July 2012).
A graph from the paper:

The MEA is the Minister of External Affairs. 

See a graph of India's GDP per capita (PPP).