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Projects - Details  
  Managing Macroeconomic Risks in Low-Income Countries: Institutions and Policies

Professor Paul Collier
Professor D Vines
Dr C Adam
University of Oxford

Professor Paul Collier
CSAE, Department of Economics
University of Oxford
Manor Road

Tel: 01865 271084

Duration of Research
April 2005 - March 2008

This project has three components. The first is whether aid can be effective in moderating severe external shocks caused by sharp declines in the prices of commodity exports. Many low-income African countries are highly dependent upon a narrow range of such commodities with highly volatile prices and evidence suggests that such shocks have been highly damaging. The second and third components are concerned with the design of monetary, fiscal and exchange rate policy instruments to manage short-run macroeconomic volatility in low-income countries in which the capital account of the balance of payments is open. Shocks to be considered include changes in aid flows, severe external shocks and risk premia. The structural characteristics and the external environment facing low-income countries, particularly those in Africa, suggest a somewhat different set of monetary, fiscal and exchange rate policy responses from what has been employed elsewhere is required. These components of the project will use dynamic simulation techniques combined with econometric and case-study evidence to evaluate alternative macroeconomic policy configurations. They will examine how policy responses to shocks can reduce the risks of financial crises.

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Last modified February 2005
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