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Fiscal Response to a Temporary Trade Shock: The Aftermath of the Kenyan Coffee Boom

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  • Bevan, D L
  • Collier, P
  • Gunning, J W

Abstract

The appropriate fiscal response to a temporary terms of trade windfall is difficult to determine, even in an unregulated economy. But controls, such as those in force during the 1976- 79 coffee boom in Kenya, introduce special problems. For example, foreign exchange controls make the private investment of boom income inefficient by causing it to be undertaken too rapidly. In Kenya the boom induced a massive increase in public expenditure, far in excess of the increase in public revenue. The net effect on capital formation was negative because the fiscal response exacerbated the rise in the relative price of nontraded capital goods, and because resources were preempted for government consumption. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Bevan, D L & Collier, P & Gunning, J W, 1989. "Fiscal Response to a Temporary Trade Shock: The Aftermath of the Kenyan Coffee Boom," The World Bank Economic Review, World Bank, vol. 3(3), pages 359-378, September.
    • Handle: RePEc:oup:wbecrv:v:3:y:1989:i:3:p:359-78
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    Cited by:

    1. Mauricio Cárdenas Santa María & Zeinab Partow, 1998. "Oil, coffee and the dynamic commons problems in Colombia," Working Papers Series. Documentos de Trabajo 9206, Fedesarrollo.
    2. Sandbu, Martin E., 2006. "Natural wealth accounts: A proposal for alleviating the natural resource curse," World Development, Elsevier, vol. 34(7), pages 1153-1170, July.
    3. Asfaha, Samuel, 2007. "National Revenue Funds: Their Efficacy for Fiscal Stability and Intergenerational Equity," MPRA Paper 7656, University Library of Munich, Germany.

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