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15 Cards in this Set
- Front
- Back
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What does peter boone believe
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aid finances growth rather than investment
Aid had zero effect on growth |
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What do Burnside and Dollar believe
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Aid should be based off from those who had good policies such as low budget deficits, low inflation and free trade
Good policy creates incentives to recieve more aid |
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What is the counterfactual Question?
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how much worse would an economy be with no foreign aid
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What is predators equilibrium?
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The problems comes if two people have the same amount of capital to begin with and two choices of what to do with it (produce new goods to increase our funds, or invest in guns to protect our initial capital) If one person buys a gun than the other is made worse off but if both buy guns neither person can increase their capital
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What is the bipolar view?
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Against pegged but adjustable (soft pegs) in countries open to capital flows
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o Hard exchange pegs
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either legally mandated use of another countries currency or legal mandates that require the central bank to keep foreign assets equal to local currency in circulation and reserves. Usually have structural policies and low inflation. Tend to be long lasting
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o Soft exchange pegs
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currencies that maintain a stable value against an anchor currency. To settle inflation expectations, they allow for a limited degree of monetary policy flexibility to deal with a shock, which leads to a large devaluation or abandonment of peg. Tend to be short-term
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o Floating exchange rates
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market determined. Central banks intervene (through purchases or sales of foreign currency in exchange for local currency) to limit short-term fluctuations (The US doesn’t do this). Offer countries advantages of maintain independent monetary policies. Countries must have financial markets deep enough to absorb shocks without large exchange rate changes. Financial instruments must be available to hedge risks posed by fluctuating exchange rates. Almost all advanced economies have floating exchange rates
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What is the biggest threat to stability today?
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Terrorism (nuclear threat)
Fear of what comes across borders leads to attacks on gloablization |
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Why are natural resource abundance bad?
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rent seeking politicians
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why is labor abundance good?
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wealth based on efforts of citizens limits governments ability to extract without providing
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Institutions hypothesis?
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European colonialism created extractive and exploitative behaviors
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Market-regulating institutions
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regulatroy agencies, financial services, telecommunications and transport (adress externalities, economies of scale, and imperfect information)
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Market Stabilizing institutions
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central banks, exchange rate regimes, and budgetary and fiscal rules (ensure low inflation, macroeconomis stability, avert financial crisis)
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Market legitimizing institutions
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pension systems, unemployment insurance, and other social funds (provide social protection and insurance, involve redistrbution, and manage conflict
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