including South Africa. The question then is whether the relative magnitude of the assistance provided � changes the cyclical stance of government consumption expenditure. We assume that ��� = �� �� ( _i=0,1,2,3_ ) for countries where ����� exceeds 10 percent of GNI in the decade, and ��� = �� ( _i=0,1,2,3_ ) for countries that have received less than 10 percent of GNI or that have not received foreign aid over several years. For robustness purposes, we repeat analysis for low and high-ODA recipients but assuming a higher threshold: 13 percent of GNI, which is the 67<sup>th</sup> percentile of the SSA distribution of net-ODA to GNI ratio.

_Fragility and Conflict (Case 7)_ . Fragile and conflict states are those nations with a harmonized Country Policy and Institutional Assessment (CPIA) rating lower than or equal to 3.2, or with presence of peacekeeping or peace-building missions (World Bank 2011). The definition of fragile country has evolved over time from the classification of low income countries under stress (2006-9) to the harmonized list of fragile situations (from 2011). In this context, we will use the _polity score_ data from Polity IV data set, which characterizes the qualities of democratic and autocratic authority in governing institutions. This polity score ranges from -10 (hereditary monarchy) to +10 (consolidated democracy). It also includes exceptional cases of foreign interruption, interregnum or anarchy and transition (that takes special values of -66, -77 and -88). Using this database, we define fragile countries as those countries with failed/occupied scores (special values of -66, -77 and -88) and autocracies (values from -10 to -6 in the polity score). For robustness purposes, we expand the previous definition to include closed anocracies (values greater than or equal to -5 and smaller than 0 in the polity score).<sup>11</sup> _Estimation procedure_ . We estimate Equation 1 through the Pooled OLS and Fixed-Effect regressions. Since we are using deviations from a potential trend, the means of the cyclical components, ���� and ���� , tend to zero. Therefore, the Pooled OLS and Fixed Effect techniques will give similar coefficients, because the “within” estimation uses deviations from the country means. Second, we extend the analysis to account for possible endogeneity between the fiscal policy and GDP by using an IV/2SLS method to estimate the cyclicality coefficient ( �� ).<sup>12</sup> Following the approach used in Galí and Perotti (2003), Lane (2003), Jaimovich and Panizza (2007), and Calderón and Nguyen (2016), the cyclical component of real GDP ( ���� ) is instrumented using its own lags and the weighted average of the GDP growth of each country’s export partners. The idea is that external trade shocks do not affect government spending except through the business cycle channel. Similarly, there is no reason to think that government spending in small economies directly affects the growth rates of their trading partners. In the case of large economies, however, fiscal policy might affect the growth rates of trading partners.

# **_2.2 Data_**

The sample includes 37 Sub-Saharan African countries (SSA), 20 countries from Latin America (LAC), 20 from developing Asia, and 22 industrial economies. In the Appendix, Tables A.1 and A.2 contain the complete list of countries and the classification of resource-rich and nonresource-rich countries for SSA

> 11 Anocracies are government regimes with inherent qualities of political instability and ineffectiveness, as well as an incoherent mix of democratic and autocratic traits and practices (Marshall, Gurr and Jaggers 2016). 12 See the discussion about the endogeneity problems in Rigobón (2004).

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