Debate about the effectiveness of foreign aid has intensified in recent years, as budgetary pressures on aid have increased in donor countries. Whatever the merits of opposing arguments, the question is: do conventional measures of aid (such as OECD's Net ODA), which lump together grants and...

Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a...

The authors analyze the impact of three classes of external shocks in open economies, using a rational expectations framework that nests three prototype economies: a neoclassical full-employment benchmark, with intertemporally optimizing consumers and firms an instant clearing of asset, goods,...

Recent theoretical literature has suggested a variety of mechanisms through which poverty may deter growth and become self-perpetuating. A few papers have searched for empirical regularities consistent with those mechanisms – such as aggregate non-convexities and convergence clubs. However, a...

The recent global financial crisis has shaken the confidence of developed and developing countries alike in the very blueprint of financial and macro policies that underlie the western capitalist systems. In an effort to contain the crisis from spreading, the authorities in the US and many...

This paper provides an empirical evaluation of the impact of infrastructure development on economic growth and income distribution using a large panel data set encompassing over 100 countries and spanning the years 1960-2000. The empirical strategy involves the estimation of simple equations for...

Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are excluded from the analytical framework. The author argues that such an exclusion is both arbitrary and unrealistic. The...

An adequate supply of infrastructure services has long been viewed by both academics and policy makers as a key ingredient for economic development. Sub-Saharan Africa ranks consistently at the bottom of all developing regions in terms of infrastructure performance, and an increasing number of...