Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses
IMF Working Papers, March 1, 2004
Source details
- Canonical URL
- Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses
Other formats
Bibliographic details
- Authors: Mwanza Nkusu
- Published: March 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846874.001
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.
Key findings and analysis
- The Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy aid-induced increased demand.
- Real exchange rate appreciations may not necessarily embody the Dutch disease.
- Using public resources inefficiently can be more painful than real exchange rate appreciations.
- Diagnoses and prognoses for the Dutch disease should be tailored to country-specific circumstances to avoid ill-advised policies.
Subjects and keywords
- Subject: Aid flows, Dutch disease, Economic theory, Exports, Foreign aid, Human capital, International trade, Labor, Trade balance
- Keywords: Aid flows, and Poverty, appreciation, core Dutch disease framework, core Dutch disease theory, Dutch disease, Dutch disease economics, Dutch disease model, Dutch disease-type effect, Economic Growth, Exchange Rate, Exports, Foreign Aid, Human capital, ODA, ODA flow, ODA inflow, RER, RER appreciation, Sub-Saharan Africa, Trade balance, WP