Working Papers in full text
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
All
Other research-related activities and publications of the IMF can be found at IMF Research
|
Free Email Notification
Receive emails when we post new
items of interest to you.
Subscribe or
Modify your profile
|
|
|
|
Aid Volatility and Dutch Disease: Is There a Role for Macroeconomic Policies?
|
Author/Editor: |
Prati, Alessandro | Tressel, Thierry |
| Authorized for Distribution: |
June 1, 2006 |
|
Electronic Access: |
Free Full Text (PDF file size is 839KB)
Use the free Adobe Acrobat Reader to view this PDF file.
|
|
|
|
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
|
|
Summary: 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.
|
|
|
|
Order a print copy
|
|
Series: |
Working Paper No. 06/145 |
|
Subject(s): |
Development assistance | Monetary policy | Real effective exchange rates | Balance of trade |
|
Author's keyword(s): |
Aid effectiveness
| monetary policy
| real exchange rate
| Dutch disease
|
|
|
|
|
| |
Published: |
|
June 1, 2006 |
|
|
|
|
| |
ISBN/ISSN: |
|
0 / 1934-7073 |
|
Format: |
|
Paper |
| |
Stock No: |
|
WPIEA2006145 |
|
Pages: |
|
65 |
| |
Price: |
|
US$15.00 (Academic Rate: US$15.00 )
|
|
|
|
|
|
|
