Monetary policy rules for managing aid surges in Africa
This paper examines 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, it is shown that simple monetary rul...
| Main Authors: | , , , |
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| Format: | Journal article |
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Blackwell Publishing Ltd
2009
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| _version_ | 1797097986312896512 |
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| author | Adam, C O'Connell, S Buffie, E Pattillo, C |
| author_facet | Adam, C O'Connell, S Buffie, E Pattillo, C |
| author_sort | Adam, C |
| collection | OXFORD |
| description | This paper examines 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, it is shown 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. These simple rules, which are shown to be robust across a range of fiscal responses to aid inflows, appear to be consistent with actual responses to recent aid surges in a range of post-stabilization countries in Sub-Saharan Africa. |
| first_indexed | 2024-03-07T05:03:11Z |
| format | Journal article |
| id | oxford-uuid:d902f2b5-747d-4a07-8dec-9647121f8394 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T05:03:11Z |
| publishDate | 2009 |
| publisher | Blackwell Publishing Ltd |
| record_format | dspace |
| spelling | oxford-uuid:d902f2b5-747d-4a07-8dec-9647121f83942022-03-27T08:52:52ZMonetary policy rules for managing aid surges in AfricaJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:d902f2b5-747d-4a07-8dec-9647121f8394Social Sciences Division - DaisyBlackwell Publishing Ltd2009Adam, CO'Connell, SBuffie, EPattillo, CThis paper examines 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, it is shown 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. These simple rules, which are shown to be robust across a range of fiscal responses to aid inflows, appear to be consistent with actual responses to recent aid surges in a range of post-stabilization countries in Sub-Saharan Africa. |
| spellingShingle | Adam, C O'Connell, S Buffie, E Pattillo, C Monetary policy rules for managing aid surges in Africa |
| title | Monetary policy rules for managing aid surges in Africa |
| title_full | Monetary policy rules for managing aid surges in Africa |
| title_fullStr | Monetary policy rules for managing aid surges in Africa |
| title_full_unstemmed | Monetary policy rules for managing aid surges in Africa |
| title_short | Monetary policy rules for managing aid surges in Africa |
| title_sort | monetary policy rules for managing aid surges in africa |
| work_keys_str_mv | AT adamc monetarypolicyrulesformanagingaidsurgesinafrica AT oconnells monetarypolicyrulesformanagingaidsurgesinafrica AT buffiee monetarypolicyrulesformanagingaidsurgesinafrica AT pattilloc monetarypolicyrulesformanagingaidsurgesinafrica |