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Aid, Exports, and Growth; A Time-Series Perspective on the Dutch Disease Hypothesis

Joong S Kang, Alessandro Prati and Alessandro Rebucci ()

No 13/73, IMF Working Papers from International Monetary Fund

Abstract: We use a heterogeneous panel VAR model identified through factor analysis to study the dynamic response of exports, imports, and per capita GDP growth to a “global” aid shock. We find that a global aid shock can affect exports, imports, and growth either positively or negatively. As a result, the relation between aid and growth is mixed, consistent with the ambiguous results in the existing literature. For most countries in the sample, when aid reduces exports and imports, it also reduces growth; and, when aid increases exports and imports, it also increases growth. This evidence is consistent with a DD hypothesis, but also shows that aid-receiving countries are not “doomed” to catch DD.

Keywords: Economic models; Exchange rate appreciation; External shocks; Exports; Aid; Dutch disease; Economic growth; Development assistance; Foreign aid; Imports; Time series; Common factors, Panel VARs, Exchange rate overvaluation, exchange rate, real exchange rate, exchange rate policy, trade liberalization, Economic Growth of Open Economies, Macroeconomic Analyses of Economic Development, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2013-03-20
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Related works:
Journal Article: Aid, Exports, and Growth: a Time-Series Perspective on the Dutch Disease Hypothesis (2012) Downloads
Working Paper: Aid, Exports, and Growth: A Time-Series Perspective on the Dutch Disease Hypothesis (2011) Downloads
Working Paper: Aid, Exports, and Growth: A Time-Series Perspective on the Dutch Disease Hypothesis (2010) Downloads
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