Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses

Author/Editor:

Mwanza Nkusu

Publication Date:

March 1, 2004

Electronic Access:

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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 demonstrates that the Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy the aid-induced increased demand. Diagnoses on, and prognoses for, the Dutch disease should take into account country-specific circumstances to avoid ill-advised policies. The paper emphasizes that using public resources inefficiently can be more painful than real exchange rate appreciations, which may not necessarily embody the Dutch disease.

Series:

Working Paper No. 2004/049

Subject:

Aid flows Dutch disease Economic theory Exports Foreign aid Human capital International trade Labor Trade balance

English

Publication Date:

March 1, 2004

ISBN/ISSN:

9781451846874/1018-5941

Stock No:

WPIEA0492004

Pages:

19

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