TY - BOOK ID - 65577816 TI - Optimal Fiscal Spending and Reserve Accumulation Policies under Volatile Aid AU - Moldovan, Ioana. AU - Shu-Chun, Susan Yang. AU - Zanna, Luis-Felipe. PY - 2019 SN - 1498320228 149831211X 149832018X PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Fiscal policy KW - Consumption (Economics) KW - Mathematical models. KW - Government policy. KW - Consumer demand KW - Consumer spending KW - Consumerism KW - Spending, Consumer KW - Demand (Economic theory) KW - Banks and Banking KW - Macroeconomics KW - Public Finance KW - Foreign Aid KW - Fiscal Policy KW - Foreign Exchange KW - One, Two, and Multisector Growth Models KW - Economywide Country Studies: Africa KW - Macroeconomics: Consumption KW - Saving KW - Wealth KW - National Government Expenditures and Related Policies: Infrastructures KW - Other Public Investment and Capital Stock KW - Monetary Policy KW - National Government Expenditures and Related Policies: General KW - Public finance & taxation KW - Banking KW - Public investment spending KW - Consumption KW - Reserves accumulation KW - Expenditure KW - Private consumption KW - National accounts KW - Central banks KW - Economics KW - Public investments KW - Foreign exchange reserves KW - Expenditures, Public KW - Mexico UR - https://www.unicat.be/uniCat?func=search&query=sysid:65577816 AB - This paper assesses the optimal setting of fiscal spending and foreign exchange rate intervention policies in response to volatile foreign aid, in a small open economy model that incorporates typical features of low-income countries. Within a class of policy rules, it jointly considers the optimal aid spending and international reserve accumulation policies. The results show that it is optimal to adjust government spending gradually in response to unpredictable fluctuations in aid, while partially accumulating foreign exchange reserves to offset Dutch disease effects. Also, allocating relatively more of the government spending to productive public investment, and less to government consumption, is welfare improving. ER -