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The Macroeconomics of Scaling Up Aid: Lessons from Recent Experience

Author

Listed:
  • Mr. Andrew Berg
  • Mr. Mumtaz Hussain
  • Mr. Shaun K. Roache
  • Ms. Amber A Mahone
  • Mr. Tokhir N Mirzoev
  • Mr. Shekhar Aiyar

Abstract

This study analyzes key issues associated with large increases in aid, including absorptive capacity, Dutch disease, and inflation. The authors develop a framework that emphasizes the different roles of monetary and fiscal policy and apply it to the recent experience of five countries: Ethiopia, Ghana, Mozambique, Tanzania, and Uganda. These countries have often found it difficult to coordinate monetary and fiscal policy in the face of conflicting objectives, notably to spend the aid money on domestic goods and to avoid excessive exchange rate appreciation.

Suggested Citation

  • Mr. Andrew Berg & Mr. Mumtaz Hussain & Mr. Shaun K. Roache & Ms. Amber A Mahone & Mr. Tokhir N Mirzoev & Mr. Shekhar Aiyar, 2007. "The Macroeconomics of Scaling Up Aid: Lessons from Recent Experience," IMF Occasional Papers 2007/002, International Monetary Fund.
    • Handle: RePEc:imf:imfops:2007/002
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    Citations

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    Cited by:

    1. Fischer, A.M., 2017. "Dilemmas of externally financing domestic expenditures: Rethinking the political economy of aid and social protection through the monetary transformation dilemma," ISS Working Papers - General Series 629, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Luc Savard, 2010. "Scaling up infrastructure spending in the Philippines: A CGE top-down bottom-up microsimulation approach," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 43-59.
    3. Berg, Andrew & Portillo, Rafael & Zanna, Luis-Felipe, 2015. "Policy Responses to Aid Surges in Countries with Limited International Capital Mobility: The Role of the Exchange Rate Regime," World Development, Elsevier, vol. 69(C), pages 116-129.
    4. Pedro M. G. Martins, 2010. "Aid Absorption and Spending in Africa: A Panel Cointegration Approach," Working Paper Series 1010, Department of Economics, University of Sussex Business School.
    5. Eric Gabin Kilama, 2014. "Recipients aid absorption in the new development cooperation landscape," Economics Bulletin, AccessEcon, vol. 34(3), pages 1929-1944.
    6. Lone Christiansen & Alessandro Prati & Luca Antonio Ricci & Thierry Tressel, 2010. "External Balance in Low-Income Countries," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 265-322, National Bureau of Economic Research, Inc.
    7. Devarajan, Shantayanan & Go, Delfin S. & Page, John & Robinson, Sherman & Thierfelder, Karen, 2008. "Aid, growth, and real exchange rate dynamics," Policy Research Working Paper Series 4480, The World Bank.
    8. Kilama, Eric Gabin, 2016. "The influence of China and emerging donors aid allocation: A recipient perspective," China Economic Review, Elsevier, vol. 38(C), pages 76-91.
    9. Mr. Joannes Mongardini & Issouf Samaké, 2009. "The Macroeconomics of Scaling Up Aid: The Gleneagles Initiative for Benin," IMF Working Papers 2009/115, International Monetary Fund.
    10. Henrik Hansen & Derek Headey, 2010. "The Short-Run Macroeconomic Impact of Foreign Aid to Small States: An Agnostic Time Series Analysis," Journal of Development Studies, Taylor & Francis Journals, vol. 46(5), pages 877-896.
    11. Sanjeev Gupta, 2008. "Enhancing Effective Utilization of Aid in Fragile States," WIDER Working Paper Series RP2008-07, World Institute for Development Economic Research (UNU-WIDER).
    12. Chatterjee Santanu & Giuliano Paola & Kaya Ilker, 2012. "Where Has All the Money Gone? Foreign Aid and the Composition of Government Spending," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-36, August.
    13. Buffie, Edward F. & O'Connell, Stephen A. & Adam, Christopher, 2010. "Fiscal inertia, donor credibility, and the monetary management of aid surges," Journal of Development Economics, Elsevier, vol. 93(2), pages 287-298, November.
    14. Joong Shik Kang & Alessandro Prati & Alessandro Rebucci, 2012. "Aid, Exports, and Growth: a Time-Series Perspective on the Dutch Disease Hypothesis," Review of Economics and Institutions, Università di Perugia, vol. 3(2).
    15. Shonchoy, Abu, 2010. "The Dynamics of Spending and Absorption of Aid: Panel Data Analysis," MPRA Paper 24530, University Library of Munich, Germany.
    16. Strand, Jon, 2009. ""Revenue management"effects related to financial flows generated by climate policy," Policy Research Working Paper Series 5053, The World Bank.
    17. Mumtaz Hussain & Andrew Berg & Shekhar Aiyar, 2009. "The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience," Review of Development Economics, Wiley Blackwell, vol. 13(3), pages 491-509, August.
    18. Mumtaz Hussain & Andrew Berg & Shekhar Aiyar, 2009. "The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 491-509, August.
    19. Arndt, Channing & Davies, Rob & Makrelov, Konstantin & Thurlow, James, 2011. "Low Carbon Development and Carbon Taxes in South Africa," Conference papers 332130, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. Mr. Thomas William Dorsey & Ms. Zuzana Brixiova & Sukhwinder Singh & Mr. Helaway Tadesse, 2008. "The Landscape of Capital Flows to Low-Income Countries," IMF Working Papers 2008/051, International Monetary Fund.
    21. Mr. Niko A Hobdari, 2008. "Tanzania’s Equilibrium Real Exchange Rate," IMF Working Papers 2008/138, International Monetary Fund.

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