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Summary This is an introduction to the UNU-WIDER special issue of World Development on aid policy and the macroeconomic management of aid. We provide an overview of the 10 studies, grouping them under three sub-themes: the aid–growth relationship; the supply-side of aid (including its level, volatility, and coordination of donors); and the macroeconomic framework around aid. The studies in the special issue demonstrate the centrality of research methodology, the importance of disaggregation, and the need to account for country-specific situations and problems. This introduction concludes that the sometimes “over heated” debate on aid needs redirecting toward more rigorous analysis, in which the advantages—and disadvantages—of using aid for development can be evaluated in a calmer manner. [ABSTRACT FROM AUTHOR]

Abstract: In this paper, we present a SAM-based methodology for integrating standard CGE features with a macroeconomic World Bank–International Monetary Fund (IMF) modelling framework. The resulting macro–micro framework is based on optimising agents, but it retains key features from the macroeconomic model. We highlight that the integrated model is amenable to analyses of issues regarding poverty and income distribution, and present an application where the model is used to study a stylized macroeconomic model growth scenario for Mozambique. The integrated model projections demonstrate that the macroeconomic growth scenario overlooks an undesirable distributional impact. The integrated macroeconomic and CGE model framework is in conclusion identified as a superior modelling tool for analysing growth scenarios. [Copyright &y& Elsevier]

This paper demonstrates that developing countries differ considerably from their developed counterparts when focus is on the nature and characteristics of short-run macroeconomic fluctuations. Cycles are generally shorter, and the stylized facts of business cycles across countries are more diverse than those of the rather uniform industrialized countries. Supply-side models are generally superior in explaining changes in output, but a “one-size fits all” approach in formulating policy is inappropriate. Our results also illustrate the critical importance of understanding business regularities as a stepping-stone in the process of designing appropriate stabilization policy and macroeconomic management in developing countries. [Copyright &y& Elsevier]