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

 
Author/Editor: Kang, Joong Shik ; Prati, Alessandro ; Rebucci, Alessandro
 
Publication Date: March 20, 2013
 
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Summary: 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.
 
Series: Working Paper No. 13/73
Subject(s): Development assistance | External shocks | Exchange rate appreciation | Exports | Imports | Economic growth | Economic models | Time series

 
English
Publication Date: March 20, 2013
ISBN/ISSN: 9781484320112/2227-8885 Format: Paper
Stock No: WPIEA2013073 Pages: 29
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