This paper examines the impact of interest rates and inflation on bank loans and investment within a framework that mimics the financial sectors prevailing in most low-income developing countries. The paper emphasizes the importance of treating the lending and deposit rates of interest as...

This paper demonstrates that the Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy the aid-induced increased demand. Diagnoses on, and prognoses for, the Dutch disease should take into account country-specific circumstances to...

Amid controversies surrounding aid effectiveness, an increasing number of empirical studies find support for the idea that aid can spur growth and that the aid-growth relationship is nonlinear. Lensink and White propose a model to illustrate the possible existence of what has been labeled an...

This paper integrates a two-period overlapping generations model with a standard two-sector Hecksher-Ohlin trade model and analyzes the impact of uncertainty on domestic investment in the exportable and importable sectors, the political economy linkages between trade and financial...

This paper presents a model that incorporates uncertainty about trade reform and analyzes the effects of trade and financial liberalization on domestic investment and savings, the current account balance and the real exchange rate, both when the capital account is open and when it is closed....

This paper analyses in a sample equilibrium framework how uncertainty regarding the future level of taxes on factor incomes in the Mexican economy affects the overall volume of domestic investment and capital flight. It is a variation of the Alesina-Tabellini model, and brings out the importance...