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The Macroeconomics of Scaling Up Aid

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  • Joannes Mongardini
  • Issouf Samaké

Abstract

This paper assesses the macroeconomic implications of scaling up aid for Benin in line with the Gleneagles commitment to double aid to poor countries over the next three years to reach $85 per capita by 2010 and keep it at that level thereafter. The analysis suggests that the additional aid inflows can be accommodated under Fund-supported programs without major disruptions to macroeconomic stability, provided the inflows are highly concessional and used effectively. There are, however, significant risks that the impact on growth and poverty reduction of the additional aid inflows could fall short of expectations, given Benin''s limited absorptive and administrative capacity.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/115.

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Length: 32
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/115

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Related research

Keywords: Benin; Absorptive capacity; Aid flows; Concessional aid; Debt sustainability; Domestic investment; Financial assistance; Financial risk; Fiscal sustainability; Infrastructure; Millennium Development Goals; monetary fund; central bank; inflation; foreign aid; current account; open market operations; current account deficit; debt relief; aggregate demand; monetary policy; government debt; external debt; public finance; domestic debt; money balances; monetary authorities; domestic currency; multilateral debt relief; optimal monetary policy; central banks; external debt burden; debt burden; debt management; public debt; debt relief initiative; debt stock; current account balance; debt service; monetary union; multilateral debt; external debt stock; bilateral donors; external shocks; domestic debt markets;

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References

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  1. Raghuram G. Rajan, 2005. "Aid and Growth: What Does The Cross-Country Evidence Really Show?," Working Papers id:54, eSocialSciences.
  2. A. Senhadji Semlali & Mohsin S. Khan, 2000. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Working Papers 00/110, International Monetary Fund.
  3. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
  4. Martin Mühleisen & Dhaneshwar Ghura & Roger Nord & Michael T. Hadjimichael & E. Murat Ucer, 1995. "Sub-Saharan Africa," IMF Occasional Papers 118, International Monetary Fund.
  5. Maurice Obstfeld, 2000. "The Global Capital Market: Benefactor or Menace?," International Finance 0004001, EconWPA.
  6. Andrew Berg & Mumtaz Hussain & Shaun K. Roache & Amber Mahone & Tokhir N. Mirzoev & Shekhar Aiyar, 2007. "The Macroeconomics of Scaling Up Aid," IMF Occasional Papers 253, International Monetary Fund.
  7. Agenor, Pierre-Richard & Bayraktar, Nihal & Pinto Moreira, Emmanuel & El Aynaoui, Karim, 2005. "Achieving the Millennium Development Goals in Sub-Saharan Africa : a macroeconomic monitoring framework," Policy Research Working Paper Series 3750, The World Bank.
  8. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
  9. Emilio Sacerdoti & Gonzalo Salinas & Abdikarim Farah, 2009. "The Macroeconomic Impact of Scaled-Up Aid," IMF Working Papers 09/36, International Monetary Fund.
  10. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  11. Joannes Mongardini & Brett Rayner, 2009. "Grants, Remittances, and the Equilibrium Real Exchange Rate in Sub-Saharan African Countries," IMF Working Papers 09/75, International Monetary Fund.
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