We examine 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, we show that simple monetary rules that...

This paper sets out to provide an introduction to two sets of questions, and to some relevant literature that has tried to answer them. The first set of questions concern what determines growth in low-income countries, and how the answers are conditioned