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

Background:
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.


Working Papers :

WEF0037
Aid volatility, monetary policy rules and the capital account in
African economies

Christopher Adam, Stephen O'Connell, Edward Buffie
June 2008

WEF0029
Woodford goes to Africa
Kang Yong Tan, David Vines
July 2007

WEF0016
Monetary Policy Rules for Managing Aid Surges in Africa
Christopher Adam, Stephen O'Connell, Edward Buffie, Catherine Pattillo
February 2007


Journals, seminar papers and other publications

Adam, C., & Cobham, D., “Exchange Rate Regimes and Trade” The Manchester School (forthcoming, 2007)

Collier, P., B. Goderis, and A. Hoeffler, ‘Shocks and Growth in Low-Income Countries’, paper to be presented at UNU-WIDER Development Conference on ‘Aid: Principles, Policies and Performance’ , 16-17 June 2006, Helsinki

Adam, C. & O’Connell, S. “Monetary Policy and Aid Management in Sub-Saharan Africa” background paper for African Regional Economic Outlook, 2006 International Monetary Fund. (IMF, Washington DC)

Adam, C., O’Connell, S., Buffie, E., Pattillo, C. “Riding the Wave: Monetary Responses to Aid Surges in Low Income Countries” CSAE Working Paper Series No. 2006-04

Adam, C., O’Connell, S., Buffie, E., Pattillo, C., “Monetary policy responses to aid surges in Africa”, paper presented at UNU-WIDER Conference on Aid: Principles, Policies and Performance, June 16 – 17 (currently revised as IMF Working Paper (forthcoming)) 2006

Adam, C., O’Connell, S., Buffie, E., Pattillo, C. “Monetary Rules for Aid Surges” (mimeo)

Adam, C. & Goderis, B., “Monetary Policy and Oil Price Surges in Nigeria” forthcoming in Collier, P., Soludo, C., & Pattillo, S. (eds.) Economic Policies for a Prosperous Nigeria, Palgrave, 2007

Adam, C., & Tan, K. “Evaluating macroeconomic simulation models for low-income countries: insights from Bayesian estimation” (mimeo, to be presented to CSAE Conference, March 2007)

Adam, C., Collier, P., & Davies, V., “Post Conflict Monetary Reconstruction”

Allsopp, C., & Vines, D., “The Macroeconomic Role of Fiscal Policy” Oxford Review of Economic Policy, December 2006

Buffie, E., Adam, C., O’Connell, S., Pattillo, C., “Fiscal Inertia, Donor Credibility and Aid Surges”

Chauvet, L. & Collier, P. “What are the preconditions for turnarounds in failing states?” CSAE mimeo, January 2007)

Collier, P., Goderis, B., & Hoeffler, A., “Shocks and Growth in Low-Income Countries”, paper to be presented at UNU-WIDER Development Conference on ‘Aid: Principles, Policies and Performance’, 16-17 June 2006, Helsinki

Collier, P., & Goderis, B., “Commodity prices and growth: Reconciling a conundrum” (mimeo CSAE, Oxford)

Collier, P., & Goderis, B., “Would there be a pay-off to shock-contingent aid?”

Collier, P., “Is Aid Oil?” World Development, 2006.

Collier, P., “Why the WTO is Deadlocked and What Can be Done About it”, The World Economy, 2006

Collier, P., &  Chauvet, L., “Helping Hand? Aid to Failing States” (CSAE mimeo, August 2006)

Collier, P., “Grants versus Loans”, in Kaul, I., ed., Global Public Finance. Oxford University Press, (forthcoming)

Collier, P., “Oil, growth and governance in Nigeria’, forthcoming in Soludo, C., & Pattillo, C., (eds.) Economic Policies for a Prosperous Nigeria, Palgrave, 2007

Collier, P., “Grants versus Loans”, in Kaul, I., ed., Global Public Finance. Oxford University Press, (forthcoming)

Collier, P., “Oil, growth and governance in Nigeria’, forthcoming in Soludo, C., & Pattillo, C., (eds.) Economic Policies for a Prosperous Nigeria, Palgrave, 2007

Corden, W. M. and Vines, D., “The International Monetary Fund (2007) New Palgrave Dictionary of Economics, forthcoming

Eijffinger, S., & Goderis, B., “The effect of monetary policy on exchange rates during currency crises; the role of debt, institutions and financial openness”, 2006

Eijffinger, S., & Goderis, B., “Currency crises, monetary policy, and balance sheet vulnerabilities”, German Economic Review, forthcoming (2007)

Garnaut, R., & Vines, D. (2006) “Sorting out the Spaghetti: On reducing the damage from the proliferation of discriminatory regional Free Trade Areas”, forthcoming in an issue of The Oxford Review of Economic Policy on Reform of the World Trade Organisation, to be published in July 2007.  

Goderis, B & Ioannidou, V., “Do high interest rates defend currencies during speculative attacks? New evidence”, CSAE working paper, 2006-11

Joshi, V., Lane, T., and Vines, D., (2006) “The US, China and Europe: How to Achieve an orderly Resolution of Global Imbalances” (mimeo, October 2006). 

Kirsanova, T., Stehn, J., & Vines, D., “Five Equation Macroeconomics: A Simple Analysis of the Interactions between Fiscal Policy and Monetary Policy”, Oxford Review of Economic Policy, December 2006. CEPR Discussion paper no 5464

T. Kirsanova, G. Menzies and Vines, D., (2006) “Stiglitz versus the IMF on the Asian Financial Crisis: an Inter-temporal Model with Real Exchange Rate Overshooting”, (mimeo).

Kirsanova, T., Menzies, G., & Vines, D., “Stiglitz versus the IMF on the Asian Financial Crisis”

Kuralbayeva, K., & Vines, D., “The Dutch Disease in a world with high capital mobility: an intertemporal model”

Kuralbayeva, K. & Vines, D., (2006) “Terms of Trade Shocks in an Inter-temporal Model: should we worry about the Dutch Disease or Excessive Borrowing?” CEPR Discussion Paper no 5857

Menzies, G. & Vines, D., (2006) “The Transfer Problem and Real Exchange Rate Overshooting in Financial Crises: The Role of the Debt Servicing Multiplier”, (mimeo)

O’Connell, S., Adam, C., Buffie, E., Pattillo, C., “Managing External Volatility: Central Bank Options in Low-Income Countries” in Nicoletta Batini (ed) Monetary Policy in Emerging Economies and Developing Countries (Nova Publishers, New York, 2006).

Tan, K. Y., “A pooled mean group analysis on aid and growth” CSAE Working Paper Series No. 2006-14, 2006

Tan, K.Y., & Vines, D., (2006) “What Really Happened to Indonesia during the Asian Financial Crisis: Using the G-Cubed model to Find out”, (mimeo).

Adam, C., S.O'Connell, E. Buffie and C.Pattillo, 'Monetary Policy Responses to Aid Surges in Africa', paper to be presented at UNU-WIDER Development Conference on 'Aid: Principles, Policies and Performance' , 16-17 June 2006, Helsinki

Adam, C.and D.P.Cobham, 'Exchange Rate Regimes and Trade', paper to be presented at RES Conference University of Nottingham, April 2006 (also available as Heriot Watt University CERT Discussion Paper No. 05/05 (October 2005). http://www.som.hw.ac.uk/cert/wpa/2005/dp0505.htm

Collier, P., B. Goderis, and A. Hoeffler, 'Shocks and Growth in Low-Income Countries', paper to be presented at UNU-WIDER Development Conference on 'Aid: Principles, Policies and Performance' , 16-17 June 2006, Helsinki

Garnaut, R. and D. Vines 'Sorting out the Spaghetti: On reducing the damage from the proliferation of discriminatory regional Free Trade Areas' Paper presented at a seminar on 'An Assessment of the Doha Round after Hong Kong', organised by the Initiative for Policy Dialogue and the Brooks World Poverty Institute at Manchester University on 2-3 February 2006

Allsopp C., and D. Vines, 'The Macroeconomic Role of Fiscal Policy' Oxford Review of Economic Policy, December 2006

Collier, P., and J.W. Gunning, 'Asset Policies during an Oil Windfall', The World Economy, 2005.

Kirsanova, T., J. Stehn andD. Vines, 'Five Equation Macroeconomics: A Simple Analysis of the Interactions between Fiscal Policy and Monetary Policy', Oxford Review of Economic Policy, December 2006.CEPR Discussion paper no 5464

Collier, P., 'Grants versus Loans', in I. Kaul, ed., Global Public Finance. Oxford University Press, (forthcoming).


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

Contact:
Professor Paul Collier
CSAE, Department of Economics
University of Oxford
Manor Road
Oxford
OX1 3UQ

Tel: 01865 271084
email:

Duration of Research:
April 2005 - March 2008