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Containing Volatility : Windfall Revenues for Resource-Rich Low-Income Countries / Dobronogov, Anton
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Dobronogov, Anton
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Debt Markets.
- Economic Growth.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Foreign Aid.
- Macroeconomics and Economic Growth.
- Natural Resources.
- Political Economy.
- Private Sector Development.
- Rent Seeking.
- Volatility.
- Local Subjects:
- Access to Finance.
- Debt Markets.
- Economic Growth.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Foreign Aid.
- Macroeconomics and Economic Growth.
- Natural Resources.
- Political Economy.
- Private Sector Development.
- Rent Seeking.
- Volatility.
- Physical Description:
- 1 online resource (26 pages)
- Other Title:
- Containing Volatility
- Place of Publication:
- Washington, D.C., The World Bank, 2014
- System Details:
- data file
- Summary:
- An abundance of natural resources is both an opportunity and a challenge for developing countries. Several resource-rich, low-income countries receive amounts of foreign aid that are similar to or larger than their actual or potential revenues from natural resources. In such countries, the donors may have an opportunity to help a government to use its resource revenues productively and minimize the magnitude of risks created by resource rents. Development of aid instruments tailored for such purposes might be helped by model-based analysis of the effects of foreign aid on resource-rich, low-income economies and its interactions with the flows of natural resource revenues. This paper develops a growth model a la Barro in which the government receives windfalls (from natural resources and foreign aid) and rent-seeking agents contest for public funds. The key conclusion is that making aid countercyclical helps to achieve higher economic growth, and so does conditioning disbursements on enhancement of public capital. Introducing elements of insurance in the design of both aid products financing investments in infrastructure and social services and supporting policy and institutional reforms may help to achieve both of these objectives.
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