Aid and Dutch Disease in Sub-Saharan Africa

David Fielding and Fred Gibson ()
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Fred Gibson: Department of Economics, University of Otago

No 1108, Working Papers from University of Otago, Department of Economics

Abstract: 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 SubSaharan 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.

Keywords: Aid; Dutch Disease; Africa (search for similar items in EconPapers)
JEL-codes: F41 O5 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-08, Revised 2011-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.otago.ac.nz/economics/research/otago076666.pdf This version, 2011 (application/pdf)

Related works:
Journal Article: Aid and Dutch Disease in Sub-Saharan Africa (2013)
Working Paper: Aid and Dutch Disease in Sub-Saharan Africa (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1108

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