Aid and the real exchange rate: Dutch disease effects in African countries

Abstract

ArticleAid and the real exchange rate: Dutch disease effects in African countries Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

Foreign Capital Inflows, Economic Policies and the Real Exchange Rate in Sub Saharan Africa: Is There an Interaction Effect?

“…The result of an extended model that considered simultaneously four interaction variables revealed that a one-percentage-point increase in the ratio to GDP of aggregate net capital inflow by itself raises their mean real exchange rate by 0.03 percent a year. This finding is consistent with the supposition by Adenauer and Vagassky (1998) of a significant positive relationship between net official foreign aid inflows and real exchange rate behaviour for four CFA Franc countries, Burkina Faso, Côte d'Ivoire, Senegal and Togo, from 1980 to 1993. In the case of our twenty-four SSA states, however, this positive effect was counterbalanced when the transfer of foreign currency was accompanied by policies to liberalise international trade controls and relax credit rationing in the private sector.…”

“…The determinants of an equilibrium real exchange rate that is compatible with the attainment of internal and external balances in SSA countries have been extensively discussed by Ghura and Grennes (1993), Nyoni (1998), Adenauer and Vagassky (1998), Sackey (2001) and Outtara and Strobl (2004) among others. All of these studies adopted the general reduced form regression equation proposed by Edwards (1988).…”

When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth

“…Although they do not provide any evidence of causation from manufacturing exports to growth, they conjecture that their findings may explain why the evidence about the impact of aid on growth is so ambiguous. Adenauer and Vagassky (1998) test the existence of DD symptoms in four CFA zone countries during 1980-1992, by using regression analysis to study the link between higher aid and the real exchange rate. They find that an increase in aid leads to a RER appreciation.…”

The Impact of Capital and Foreign Exchange Flowson the Competitiveness of Developing Countries

“…The study concludes that part of the reason that real appreciation (and consequently, Dutch disease) was not observed in those cases is precisely because authorities were concerned with competitiveness and restricted aid absorption accordingly. Adenauer and Vagassky (1998) find that aid contributes substantially to real exchange appreciation in the countries of the West African Economic and Monetary Union. For a large sample of developing countries, Kang et al (2007) find that aid flows have a negative effect on exports linked to REER overvaluation for half the sample and a positive impact on growth and exports for the other half of the sample.…”