"Politics rules. Whether we like it or not, we are subject to politics wherever we go and whatever we are doing. Development is always and everywhere political, and frequently occurs with the interests of the powerful at the forefront. Can we hope to better understand the politics that shapes...

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...