Aid and the fiscal and monetary responses to Dutch disease

This study assesses the fiscal and monetary management challenges that can be associated with large inflows of foreign aid. It provides a brief overview of the literature on Dutch Disease (DD) as applied to mineral wealth and then assesses the conventional policy responses that are available to mitigate the main problems that can be caused by DD. This discussion incorporates an identification of the additional issues and transmission mechanisms that arise when the source of DD is a surge in foreign aid. This analysis is designed to illuminate the circumstances in which an aid-induced DD effect... Mehr ...