Fiscal inertia, donor credibility, and the monetary management of aid surges
Donors cannot pre-commit to support scaled-up public spending programs on a continuing basis, nor can governments credibly commit to curtail expenditure rapidly in the event that aid revenues contract. An aid boom may therefore be accompanied by a credibility problem. When this is the case, the absorb-and-spend strategy recommended by the IMF leads to capital flight, higher inflation, and large current account surpluses inclusive of aid. The right policy package combines a critical minimum degree of fiscal restraint with reverse sterilization.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eifert, Benn & Gelb, Alan, 2005. "Improving the dynamics of aid : towards more predictable budget support," Policy Research Working Paper Series 3732, The World Bank.
- Oya Celasun & Jan Walliser, 2008. "Predictability of aid: Do fickle donors undermine aid effectiveness?," Economic Policy, CEPR;CES;MSH, vol. 23, pages 545-594, 07.
- Arellano, Cristina & Bulír, Ales & Lane, Timothy & Lipschitz, Leslie, 2009.
"The dynamic implications of foreign aid and its variability,"
Journal of Development Economics,
Elsevier, vol. 88(1), pages 87-102, January.
- Timothy D. Lane & Leslie Lipschitz & Cristina Arellano & Ales Bulir, 2005. "The Dynamic Implications of Foreign Aid and Its Variability," IMF Working Papers 05/119, International Monetary Fund.
- Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-4.
- Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
- Buffie, Edward & Adam, Christopher & O'Connell, Stephen & Pattillo, Catherine, 2008. "Riding the wave: Monetary responses to aid surges in low-income countries," European Economic Review, Elsevier, vol. 52(8), pages 1378-1395, November.
- Edward Buffie & Christopher Adam & Stephen O'Connell & Catherine Patillo, 2006. "Riding the Wave: Monetary Responses to Aid Surges in Low-Income Countries," CSAE Working Paper Series 2006-04, Centre for the Study of African Economies, University of Oxford.
- Steven B. Kamin & Neil R. Ericsson, 1993. "Dollarization in Argentina," International Finance Discussion Papers 460, Board of Governors of the Federal Reserve System (U.S.).
- Miguel A Savastano, 1996. "Dollarization in Latin America; Recent Evidence and Some Policy Issues," IMF Working Papers 96/4, International Monetary Fund.
- Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, vol. 36(10), pages 2048-2066, October.
- A. Javier Hamann & Ales Bulir, 2006. "Volatility of Development Aid; From the Frying Pan into the Fire?," IMF Working Papers 06/65, International Monetary Fund.
- Henstridge, N M, 1999. "De-monetisation, Inflation and Coffee: The Demand for Money in Uganda," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(3), pages 345-385, October.
- Marquez, Jaime, 1987. "Money demand in open economies: A currency substitution model for Venezuela," Journal of International Money and Finance, Elsevier, vol. 6(2), pages 167-178, June.
- David Fielding, 1994. "Money Demand in Four African Countries," Journal of Economic Studies, Emerald Group Publishing, vol. 21(2), pages 3-37, May.
- Blundell, Richard, 1988. "Consumer Behaviour: Theory and Empirical Evidence--a Survey," Economic Journal, Royal Economic Society, vol. 98(389), pages 16-65, March.
- Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
- Peter S. Heller, 2005. "Pity the Finance Minister; Issues in Managing a Substantial Scaling-Up of Aid Flows," IMF Working Papers 05/180, International Monetary Fund.
- Asea, Patrick K & Reinhart, Carmen M, 1996. "Le Prix de l'Argent: How (Not) to Deal with Capital Inflows," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 231-271, October.
- Adam, Christopher, 1999. "Financial Liberalisation and Currency Demand in Zambia," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(3), pages 268-306, October.
- Stephane Pallage & Michel A. Robe, 2003. "On the Welfare Cost of Economic Fluctuations in Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 677-698, 05.
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- Jean-Claude Nachega, 2001. "Financial Liberalization, Money Demand, and Inflation in Uganda," IMF Working Papers 01/118, International Monetary Fund.
- Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
- C. L. Ramirez-Rojas, 1985. "Currency Substitution in Argentina, Mexico, and Uruguay (Substitution de monnaie en Argentine, au Mexique et en Uruguay) (SustituciÃ³n de moneda en Argentina, MÃ©xico y Uruguay)," IMF Staff Papers, Palgrave Macmillan, vol. 32(4), pages 629-667, December.
- Christopher S. Adam & David L. Bevan, 2003. "Aid, Public Expenditure and Dutch Disease," CSAE Working Paper Series 2003-02, Centre for the Study of African Economies, University of Oxford.
- Christopher Adam & David Bevan, 2004. "Aid, Public Expenditure and Dutch Disease," Development and Comp Systems 0409027, EconWPA.
- Timothy D. Lane & Ales Bulir, 2002. "Aid and Fiscal Management," IMF Working Papers 02/112, International Monetary Fund.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762. Full references (including those not matched with items on IDEAS)