Aid and Dutch Disease in the South Pacific

David Fielding

No RP2007-50, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The impact of aid inflows on relative prices and output is ambiguous. Aid inflows that increase domestic expenditure are likely to cause real exchange rate appreciation, ceteris paribus. However, if this expenditure raises the capital stock in the traded goods sector, then output in this sector might not contract, at least in the steady state. Moreover, if investment in the nontraded goods sector is relatively high and/or productive, then there is not necessarily any real exchange rate appreciation in the steady state.

Keywords: Economic assistance and foreign aid; Public expenditures; Foreign exchange; Investments (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (6)

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Working Paper: Aid and Dutch Disease in the South Pacific (2007)
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