EM Replication Package for "Miserable or Lucky? Aid targeted to the financial sector"

Ourresearch investigates the linkage between financial aid and bank stability,focusing on the channels of financial development and macroprudential policy.We select recipient countries and particularly emphasize those receiving aidtargeted at the financial sectors as the subjects of analysis. These countriesoften face economic instability and rely on external aid to stabilize theireconomic conditions or promote national financial reforms to restructure their financialsystem. We find that increasing financial sector-targeted aid correlates to asignificant increase in non-performing loans and default risk, reducing bankstability. Our findings highlight the critical roles played by financialdevelopment and macroprudential policy in mediating financial aid’s impact onbank stability. This paper sheds light on the mechanisms involved and offersvaluable insights for banks to improve their financial development and forpolicymakers to enhance the effectiveness of macroprudential policies.