Click here for search results
Aid, growth, and real exchange rate dynamics
 
Author:Devarajan, Shantayanan; Go, Delfin S.; Page, John; Robinson, Sherman; Thierfelder, Karen; Collection Title:Policy Research working paper ; no. WPS 4480
Country:World; Date Stored:2008/01/16
Document Date:2008/01/01Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Currencies and Exchange Rates; Emerging Markets; Debt Markets; Language:English
Region:The World RegionReport Number:WPS4480
Volume No:1 of 1  

Summary: 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.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 44 pagesOfficial version*0.20
TextText version**
How To Order

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.



Permanent URL for this page: http://go.worldbank.org/NRKRM0YK60