A perfect foresight OLG model is set up to study the dynamic response of a small open economy to a temporary fiscal impetus (bond-financed government deficit) anticipated to be closed by a mix of taxes, money finance and grant aid. The model is solved for the general mixed tax-money-aid finance...

The grant element is the “gift portion” of a financial transaction. The mathematical technique for arriving at a precise grant element percentage was first proposed by John Pincus of the RAND Corporation in 1963, and developed mathematically by Göran Ohlin of the Development Centre in 1966....