The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience

Shekhar Aiyar, Andrew Berg () and Mumtaz Hussain

No RP2008-79, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper investigates the macroeconomic challenges created by a surge in aid inflows. It develops an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid—where the central bank controls absorption through monetary policy and the sale of foreign exchange and the fiscal authority controls spending. Different combinations of absorption and spending lead to different macroeconomic consequences.

Keywords: Economic assistance and foreign aid; Economic policy; Foreign exchange; Monetary policy (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-dev and nep-mac
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Citations: View citations in EconPapers (22)

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Journal Article: The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience (2009)
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