Title: Aid, Growth, And Real Exchange Rate Dynamics
Abstract: No AccessPolicy Research Working Papers22 Jun 2013Aid, Growth, And Real Exchange Rate DynamicsAuthors/Editors: Shantayanan Devarajan, Delfin S. Go, John Page, Sherman Robinson, Karen ThierfelderShantayanan Devarajan, Delfin S. Go, John Page, Sherman Robinson, Karen Thierfelderhttps://doi.org/10.1596/1813-9450-4480SectionsAboutPDF (0.2 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:Devarajan, Go, Page, Robinson, and Thierfelder argued that if aid is about the future and recipients are able to plan consumption and investment decisions optimally over time, then the potential problem of an aid-induced appreciation of the real exchange rate (Dutch disease) does not occur. In their paper, "Aid, Growth and Real Exchange Rate Dynamics," this key result is derived without requiring extreme assumptions or additional productivity story. The economic framework is a standard neoclassical growth model, based on the familiar Salter-Swan characterization of an open economy, with full dynamic savings and investment decisions. It does require that the model is fully dynamic in both savings and investment decisions. An important assumption is that aid should be predictable for intertemporal smoothing to take place. If aid volatility forces recipients to be constrained and myopic, Dutch disease problems become an issue. Previous bookNext book FiguresReferencesRecommendedDetailsCited ByAid-for-trade facilitationReview of World Economics, Vol.148, No.228 December 2011Foreign Transfers and Real Exchange Rate Adjustments in a Financially Constrained Dependent EconomyOpen Economies Review, Vol.20, No.218 March 2009 View Published: January 2008 Copyright & Permissions Related RegionsAfricaRelated CountriesGhanaTurkeyRelated TopicsFinance and Financial Sector DevelopmentMacroeconomics and Economic GrowthPrivate Sector Development KeywordsDEBTEQUILIBRIUMEXTREME POVERTYINCENTIVE EFFECTSMACROECONOMIC MANAGEMENTMARGINAL PRODUCTIVITYOPEN ECONOMYPRODUCTIVITYSAVINGSSIDE EFFECTS PDF DownloadLoading ...