THEORETICAL DIMENSIONS OF POST-WAR RECOVERY

Abstract

This paper aims to develop a theoretical framework for post-war recovery financing, substantiating its interpretation as a layered, institutionally conditioned and risk-sensitive system of capital allocation. Methodology. The study's methodology draws on Keynesian economics, Rosenstein-Rodan’s big-push theory, Hirschman’s theory of unbalanced growth, Musgrave’s theory of public finance, North’s institutional theory and Stiglitz’s information economics. Methods employed include theoretical generalisation, comparative analysis, structural decomposition and conceptual synthesis. Results. It has been established that post-war recovery financing should not be reduced to a single fiscal task or the mere mobilisation of external resources. This study demonstrates that its effectiveness depends on the interaction of several interconnected layers: stabilisation finance; coordinated reconstruction finance; strategic sectoral prioritisation; institutional support; and risk-absorption mechanisms to mobilise private capital. The study proves that grants, budget support and concessional resources dominate the initial phase of recovery due to weak private demand and heightened uncertainty. In contrast, guarantees, insurance, co-financing and blended instruments are important for the later-stage crowding-in of commercial investment. The results also show that institutional quality—including procurement credibility, enforcement mechanisms, monitoring systems and administrative capacity—is an integral part of the recovery financing architecture, rather than an external condition. Additionally, the study highlights the importance of distinguishing between compensatory financing, which restores destroyed assets and minimum functionality, and transformational financing, which drives structural modernisation and alters the economy's long-term growth trajectory. Practical implications. The proposed framework can serve as a conceptual basis for the design of post-war financing strategies, the selection of appropriate financial instruments, the structuring of public-private participation models and the improvement of reconstruction policy coherence in countries affected by war. Value/Originality. This research is novel in that it develops an integrated theoretical approach to post-war recovery financing, synthesising macroeconomic, developmental, institutional and financial perspectives. The study's originality lies in substantiating post-war recovery financing as a coherent interdisciplinary system, where the effectiveness of reconstruction depends on more than just the scale of funding. Other factors include sequencing, institutional embeddedness, sectoral coordination and the capacity to reduce extreme risk.