Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid Between nonDAC and DAC Donor Countries

Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives, and insufficient coordination. The emergence of an increasing number of new donors may further complicate the coordination of international aid efforts. At the same time, it is open to question whether new donors (many of which were aid recipients until recently) are more altruistic and provide better targeted aid according to need and merit. Project-level data on aid by new donors, as collected by the AidData initiative, allow for empirical analyses comparing the allocation behavior of new versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that, on average, new donors care less for recipient need than old donors. New and old donors behave similarly in several respects, however. They disregard merit by not taking the level of corruption in recipient countries into account. Concerns that commercial self-interest distorts the allocation of aid seem to be overblown for both groups.     

Globalization, Financial Volatility and Monetary Policy

Recently it has often been claimed that globalization eases the job of central banks as it helps to tame inflation. This is used to argue that central banks (particularly the ECB, referring to the objectives as laid down in the EU Treaty) could or should reduce their efforts in the fight against inflation in favor of supporting the general economic policies of the governments. This paper takes a critical look at this argument, pointing to the structural changes associated with globalization and to the corresponding increase in uncertainty by which the central banks are affected. As an example of this, the increase in financial volatility is analyzed and explained as the result of optimal portfolio allocation, and its implications for monetary policy are discussed.     

Practical Problems with Reduced‐rank ML Estimators for Cointegration Parameters and a Simple Alternative*

Johansen's reduced‐rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect. The two estimators are compared in a small simulation study. It is found that the GLS estimator can indeed be an attractive alternative to ML estimation of cointegration parameters.     

On a stochastic approximation procedure based on averaging

Based on the idea of averaging a new stochastic approximation algorithm has been proposed by Bather (1989), which shows a preferable performance for small to moderate sample sizes. In the present paper an almost sure representation is established for this procedure, which gives the optimal rate of convergence with minimal asymptotic variance. Work partly supported by the research grant Ku719/2-1 of the Deutsche Forschungsgemeinschaft     

Unified structural adjustment policy in Europe?

Low growth and high unemployment have induced the European Union (EU) to outline an economic programme in which long-term effective growth and structural policy measures play a central role. Simultaneously, the German government adopted an “action programme aiming at more growth and employment”, in which the efforts on the EU level play hardly any role. Is international coordination of growth and structural adjustment policy legitimated from an economic point of view or is competition between national policies more efficient?