View metadata

dc.titleAid, Exports, and Growth: A Time-Series Perspective on the Dutch Disease Hypothesis
dc.contributor.authorKang, Joong Shik
dc.contributor.authorPrati, Alessandro
dc.contributor.authorRebucci, Alessandro
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageThe Caribbean
dc.coverageCentral America
dc.coverageSouth America
dc.date.available2011-02-07T00:00:00
dc.date.issue2010-08-01T00:00:00
dc.description.abstractThe available evidence on the effects of aid on growth is notoriously mixed. We use a novel empirical methodology, a heterogeneous panel vector-autoregression model identified through factor analysis, to study the dynamic response of exports, imports, and per capita GDP growth to a "global" aid shock (the common component of individual country aid-to-GDP ratios). We find that the estimated cumulative resposive of exports and per capita GDP growth to a global aid shock are strongly positively correlated, and both responses are inversely related to exchange rate overvaluation measures. We interpret this evidence as consistent with the Dutch disease hypothesis. However, we also find that, in countries with less overvalued real exchange rates, exports and per capita GDP growth respond positively to a global aid shock. This evidence suggests that preventing exchange rate overvaluations may allow aid-receiving countries to avoid the Dutch disease.
dc.identifier.doihttp://dx.doi.org/10.18235/0010989
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Aid-Exports-and-Growth-A-Time-Series-Perspective-on-the-Dutch-Disease-Hypothesis.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectIntegration and Trade
dc.subject.jelcodeF35 - Foreign Aid
dc.subject.jelcodeF43 - Economic Growth of Open Economies
dc.subject.jelcodeO11 - Macroeconomic Analyses of Economic Development
dc.subject.keywordsIDB-WP-114
dc.typeWorking Papers
idb.identifier.pubnumberWorking Papers
idb.operationRG-K1089
Return to Publication