Policy Responses to Aid Surges in Countries with Limited International Capital Mobility : The Role of the Exchange Rate Regime /
We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption - an increase in the current account deficit net of aid-delivering the same effects as those of a fle...
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| Other Authors: | , |
| Format: | Journal |
| Language: | English |
| Published: |
Washington, D.C. :
International Monetary Fund,
2014.
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| Series: | IMF Working Papers; Working Paper ;
No. 2014/018 |
| Online Access: | Full text available on IMF |
| Summary: | We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption - an increase in the current account deficit net of aid-delivering the same effects as those of a flexible regime but with a necessary increase in inflation. Regardless of the regime, policies that limit absorption-and result in large accumulation of reserves-are welfare reducing: they help reduce the real appreciation (and inflation under the peg), but at the expense of reducing private consumption and investment, and therefore medium-term growth. |
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| Item Description: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| Physical Description: | 1 online resource (41 pages) |
| Format: | Mode of access: Internet |
| ISSN: | 1018-5941 |
| Access: | Electronic access restricted to authorized BRAC University faculty, staff and students |