Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The paper examines the effects of aid and its volatility on consumption, investment, and the structure of production in the context of an intertemporal two-sector general equilibrium model. A permanent flow of aid finances mainly consumption, a result consistent with the historical failure of aid inflows to translate into sustained growth. Shocks to aid are reflected mainly in investment fluctuations, as a result of consumption smoothing. Aid shocks result in substantial welfare losses, suggesting that aid variability should be taken into account in designing aid architecture. These results are consistent with the evidence from cross-country regressions of manufactured exports.

Consumption (Economics) -- Developing countries -- Econometric models. --- Economic assistance -- Developing countries -- Econometric models. --- Electronic books. -- local. --- Exports and Imports --- Foreign Exchange --- Macroeconomics --- Production and Operations Management --- Macroeconomics: Consumption --- Saving --- Wealth --- Trade: General --- Macroeconomics: Production --- Labor Economics: General --- International economics --- Currency --- Foreign exchange --- Labour --- income economics --- Consumption --- Exports --- Productivity --- Real exchange rates --- Labor --- Economics --- Industrial productivity --- Labor economics --- United States

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper presents a new model based on the loan-pushing model by Basu (1991) to show how a domestic debt crisis can occur in a low-income country following donor herding. The model focuses on the rational herding behavior of donors due to payoff and information externalities. Although there are many theoretical models on herding behavior, these models have not formally considered the relationship between donor herding and domestic debt crisis in a low-income country. This paper is an attempt to fill this gap. The paper shows that due to donor herding behavior a domestic debt crisis can occur once the actual debt level is above the desirable one.

Debts, External -- Developing countries -- Econometric models. --- Economic assistance -- Developing countries -- Econometric models. --- Electronic books. -- local. --- Political Science --- Law, Politics & Government --- Public Finance --- Debts, External --- Economic assistance --- Econometric models. --- Economic aid --- Foreign aid program --- Foreign assistance --- Grants-in-aid, International --- International economic assistance --- International grants-in-aid --- Debts, Foreign --- Debts, International --- External debts --- Foreign debts --- International debts --- Economic policy --- International economic relations --- Conditionality (International relations) --- Debt --- International finance --- Investments, Foreign --- Banks and Banking --- Exports and Imports --- Financial Risk Management --- Industries: Financial Services --- Debt Management --- Sovereign Debt --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Crises --- International Lending and Debt Problems --- Interest Rates: Determination, Term Structure, and Effects --- Public finance & taxation --- Finance --- Economic & financial crises & disasters --- International economics --- Domestic debt --- Loans --- Financial crises --- Debt default --- Real interest rates --- Debts, Public --- Interest rates