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Aid and fiscal instability.

Abstract:

We show that a combination of temporariness and spending pressure is intrinsic to the aid relationship. In our analysis, recipients rationally discount the pronouncements of donors about the duration of their commitments because in equilibrium they know that some donors will honor those commitments while others will not. Donor types pool in equilibrium; in sharp contrast to conventional signaling situations, there is no separating equilibrium in pure strategies. Moreover, pooling necessarily ...

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Volume:
WPS/2008-18
Series:
Working Paper Series
Publication date:
2008-01-01
URN:
uuid:cad51c7b-6adf-48e6-bc04-f3f5b98cf3f0
Local pid:
oai:economics.ouls.ox.ac.uk:13196
Language:
English

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