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Enhancing Effective Utilization of Aid in Fragile States

  • Gupta, Sanjeev
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    This paper explores the macroeconomic implications of aid flows in countries with weak institutions. It argues that these countries should take into account their overall macroeconomic position, their capacity to absorb aid at the sectoral and subnational levels, and the strength of their fiscal institutions in deciding how much and how fast to spend aid. These considerations may warrant a gradual use of aid, except when aid is provided for humanitarian purposes. There is some basis for frontloading spending for countries emerging from a conflict, otherwise fragile states should seek to smoothen their spending against the background of aid volatility and uncertainty.

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    File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-07.pdf
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    Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2008/07.

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    Length: 18 pages
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:unu:wpaper:rp2008-07
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    1. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
    2. Sanjeev Gupta & Shamsuddin Tareq & Benedict Clements & Alex Segura-Ubiergo & Rina Bhattacharya, 2005. "Rebuilding Fiscal Institutions in Post-Conflict Countries," Public Economics 0504010, EconWPA.
    3. Andrew Berg & Mumtaz Hussain & Shaun K. Roache & Amber Mahone & Tokhir N. Mirzoev & Shekhar Aiyar, 2007. "The Macroeconomics of Scaling Up Aid; Lessons from Recent Experience," IMF Occasional Papers 253, International Monetary Fund.
    4. Dani Rodrik, 2000. "Institutions for High-Quality Growth: What They are and How to Acquire Them," NBER Working Papers 7540, National Bureau of Economic Research, Inc.
    5. Xavier Debrun & Peter S. Heller & Theo Thomas & Menachem Katz & Isabell Adenauer & Taline Koranchelian, 2006. "Making Fiscal Space Happen; Managing Fiscal Policy in a World of Scaled-Up Aid," IMF Working Papers 06/270, International Monetary Fund.
    6. Gupta, Sanjeev & Clements, Benedict & Bhattacharya, Rina & Chakravarti, Shamit, 2004. "Fiscal consequences of armed conflict and terrorism in low- and middle-income countries," European Journal of Political Economy, Elsevier, vol. 20(2), pages 403-421, June.
    7. Addison, Tony & Chowdhury, Abdur R. & Murshed, S. Mansoob, 2002. "By How Much Does Conflict Reduce Financial Development?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    8. Christopher Adam & Paul Collier & Victor A.B. Davies, 2008. "Postconflict Monetary Reconstruction," World Bank Economic Review, World Bank Group, vol. 22(1), pages 87-112, January.
    9. Davies, Victor A. B., 2007. "Capital flight and war," Policy Research Working Paper Series 4210, The World Bank.
    10. Elbadawi, Ibrahim A. & Kaltani, Linda & Schmidt-Hebbel, Klaus, 2007. "Post-conflict aid, real exchange rate adjustment, and catch-up growth," Policy Research Working Paper Series 4187, The World Bank.
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