We develop a model to study the macroeconomic effects of public investment surges in low-income countries, making explicit: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv)...

The World Bank and the IMF have adopted a debt sustainability framework (DSF) to evaluate the risk of debt distress in Low Income Countries (LICs). At the core of the DSF are empirically-based thresholds for each of five different measures of the debt burden (the “debt threshold approach”...

We focus on the management of highly persistent shocks to aid flows, including PRSP-related increases in net inflows, in three quot;post-stabilization.quot; African economies with de jure flexible exchange rates. Such shocks have beneficent long-run effects, but when currency substitution is...

Since 1999, the IMF's staff has been tracking several early-warning-system (EWS) models of currency crisis. The results have been mixed. One of the long-horizon models has performed well relative to pure guesswork and to available non-model-based forecasts, such as agency ratings and private...

Analysis of firm-level panel data from three sub-Saharan African economies shows that exporting manufacturers have a total factor productivity premium of 11-28 percent. The data do not allow testing of whether these premiums are caused by selection of more efficient producers into exporting or...

We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. We show that, in a simple and standard model, increases in public investment spending in inefficient countries do not have a...

This paper reexamines the relationship between aid and domestic tax revenues using a more recent and comprehensive dataset covering 118 countries for the period 1980 - 2009. Overall, our results support earlier findings of a negative association between net Official Development Assistance (ODA)...

This paper assesses the effects of fiscal consolidations associated with public debt reduction on medium-term output growth during periods of private debt deleveraging. The analysis covers 107 countries and 79 episodes of public debt reduction driven by discretionary fiscal adjustments during...

This paper uses a newly constructed revenue dataset of 35 resource-rich countries for the period 1992-2009 to analyze the impact of expanding resource revenues on different types of domestic (non resource) tax revenues. Overall, we find a statistically significant negative relationship between...

Distribution neutral fiscal policy refers to a structure of taxes and transfers that keep the income distribution unchanged even after positive or negative shocks to an economy. This is referred to as a Strong Pareto Superior (SPS) allocation which improves the standard Pareto criterion by...