A model of aid and Dutch Disease in Sub-Saharan Africa
International aid has an ambiguous effect on the macro-economy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production. However, aid for investment in the traded goods sector can mitigate this effect. Also, a relatively high level of productivity in the non-traded goods sector combined with a high level of investment will tend to depreciate the real exchange rate. We examine aid inflows in 26 Sub-Saharan African countries, and... Mehr ...
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Dokumenttyp: | doc-type:workingPaper |
Erscheinungsdatum: | 2012 |
Verlag/Hrsg.: |
Nottingham: The University of Nottingham
Centre for Research in Economic Development and International Trade (CREDIT) |
Schlagwörter: | ddc:330 / F41 / O56 / Aid / Dutch Disease / Africa |
Sprache: | Englisch |
Permalink: | https://search.fid-benelux.de/Record/base-28639648 |
Datenquelle: | BASE; Originalkatalog |
Powered By: | BASE |
Link(s) : | http://hdl.handle.net/10419/65426 |
International aid has an ambiguous effect on the macro-economy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production. However, aid for investment in the traded goods sector can mitigate this effect. Also, a relatively high level of productivity in the non-traded goods sector combined with a high level of investment will tend to depreciate the real exchange rate. We examine aid inflows in 26 Sub-Saharan African countries, and find a variety of macro-economic responses. Some of the variation in the responses can be explained by variation in observable country characteristics; this has implications for donor policy.