Monetary Policy Rules for Managing Aid Surges in Africa
Christopher Adam (),
Edward F. Buffie,
Stephen O'Connell () and
Catherine A. Pattillo
No RP2008-77, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)
Abstract:
We examine the properties of alternative monetary policy rules in response to large aid surges in low-income countries characterized by incomplete capital market integration and currency substitution. Using a dynamic stochastic general equilibrium model, we show that simple monetary rules that stabilize the path of expected future seigniorage for a given aid flow have attractive properties relative to a range of conventional alternatives, including those involving heavy reliance on bond sterilization or a commitment to a pure exchange rate float.
Keywords: Economic assistance and foreign aid; Mathematical models (Equilibrium (Economics)); Foreign exchange; Monetary policy (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-afr, nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)
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Working Paper: Monetary Policy Rules For Manging Aid Surges In Africa (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:unu:wpaper:rp2008-77
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