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Fiscal inertia, donor credibility, and the monetary management of aid surges

Abstract:

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 m...

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Publication status:
Published
Peer review status:
Not peer reviewed

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Publisher copy:
10.1016/j.jdeveco.2009.09.006

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Institution:
University of Oxford
Department:
International Development
Role:
Author
Publisher:
Elsevier
Journal:
Journal of Development Economics More from this journal
Volume:
93
Issue:
2
Pages:
287 - 298
Publication date:
2010-11-01
DOI:
ISSN:
0304-3878
Language:
English
Keywords:
UUID:
uuid:6d29494e-c64d-4b76-8714-c4084e0ac460
Local pid:
oai:economics.ouls.ox.ac.uk:14809
Deposit date:
2011-08-16

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