THE MACROECONOMIC EFFECTS OF COUNTERPART FUNDS

This article discusses the major macroeconomic effects of counterpart funds. These include their effects on the money supply, the balance of payments, government finances, and inflation. While the macroeconomic effects of aid and counterpart funds may be important in some countries at some times, in most countries they are probably too small to cause much instability or contribute much to stabilization efforts. We present some evidence on these issues.