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 inthe 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 reducingprivate consumption and investment, and therefore medium-term growth.
Publication date: January 2014
ISBN: 9781484397008
$18.00
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
English
Prices in red indicate formats that are not yet available but are forthcoming.
Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Economics / General , International - Economics , Reserve Accumulation Policies , Sterilization Policies , Transfer Problem , , fixed exchange rate , fixed exchange rate regime , flexible exchange rate , flexible exchange rate regime , real exchange rate , exchange rate appreciation , exchange rates , real exchange rate appr

Summary