Aid Volatility and Dutch Disease: Is There a Role for Macroeconomic Policies?
By: and
Sign Up Now!
Already a Member? Log In
You must be logged into Bookshare to access this title.
Learn about membership options,
or view our freely available titles.
- Synopsis
- This paper studies how macroeconomic policies can help offset two unintended and undesirable features of foreign aid: its volatility and Dutch disease. We present evidence that aid volatility augments trade balance volatility and that foreign aid, with the important exception of years of adverse shocks, depresses exports. We also find that these effects can be mitigated through changes in net domestic assets of the central bank-a variable that reflects both monetary and fiscal policy. To characterize the optimal policy, we develop a general equilibrium model in which the capital account is closed and aid influences productivity growth through positive (public expenditure) and negative (Dutch disease) externalities. In this setting, macroeconomic policies permanently affect real variables and can improve welfare if donors do not distribute foreign aid optimally over time
- Copyright:
- 2006
Book Details
- Book Quality:
- Publisher Quality
- ISBN-13:
- 9781451989359
- Publisher:
- International Monetary Fund
- Date of Addition:
- 04/24/12
- Copyrighted By:
- International Monetary Fund
- Adult content:
- No
- Language:
- English
- Has Image Descriptions:
- No
- Categories:
- Nonfiction
- Submitted By:
- Bookshare Staff
- Usage Restrictions:
- This is a copyrighted book.