Aid and Dutch Disease in Sub-Saharan Africa

David Fielding and Fred Gibson

Journal of African Economies, 2013, vol. 22, issue 1, 1-21

Abstract: International aid has an ambiguous effect on the macroeconomy 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 twenty-six Sub-Saharan African countries and find a variety of macroeconomic responses. Some of the variation in the responses can be explained by variation in observable country characteristics; this has implications for donor policy. Copyright 2013 , Oxford University Press.

Date: 2013
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Related works:
Working Paper: Aid and Dutch Disease in Sub-Saharan Africa (2012)
Working Paper: Aid and Dutch Disease in Sub-Saharan Africa (2011)
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