Aid and exchange rates in sub-Saharan Africa: Nomore dutch disease?

Given the significant inflows of foreign aid to sub-Saharan Africa (SSA) the possibility of Dutch Disease has been a concern. Most macroeconomic models predict that aid inflows, especially if large and/or unanticipated (shocks), will lead to an appreciation of the real exchange rate and undermine the competitiveness of the economy. Empirical evidence is inconclusive, but a common presumption is that aid has been associated with Dutch Disease effects in SSA. Previous empirical studies rely on annual data and few include data since themid-2000s. This paper focuses on themore recent period employ... Mehr ...