The consequences of fiscal episodes in OECD DAC countries for aid supply

• We analyse the effect of fiscal episodes in OECD donor countries in their aid expenditures.
• We use descriptive statistics provided by Alesina and Ardagna (2010) on fiscal episodes.
• Fiscal consolidation episodes affect negatively aid supply in OECD countries.
• Large fiscal stimuli effects on aid effort depend on the aid variable considered.
• European and Non-European countries behave differently in terms of aid expenditures.

This paper examines the effects of fiscal episodes in 19 OECD (Organization for Economic Co-operation and Development) donor countries on their aid supply during the period 1970–2007. We use descriptive statistics provided by Alesina and Ardagna (2010) on these episodes and regression models to perform our analysis. Overall, the results suggest that OECD donor countries curtail their aid effort during their episodes of large fiscal consolidation whereas the effects of large fiscal stimuli episodes seem to depend on the aid variable considered. However, the European Union and the Non-European countries behave differently in terms of their aid supply.