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Aid, Real Exchange Rate Misalignment, and Economic Growth in Sub-Saharan Africa

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Author Info

  • Elbadawi, Ibrahim A.
  • Kaltani, Linda
  • Soto, Raimundo

Abstract

Generating sustained growth in Sub-Saharan Africa (SSA) is one of the most pressing challenges in global development. As the region clearly needs assistance to jump start its development, foreign aid becomes crucial. This paper investigates the nexus between foreign aid, exchange rate misalignment, and economic growth in SSA. Contrary to conventional wisdom, we do not find aid to be a major contributor to exchange rate overvaluation. In addition, we found that aid fosters growth but its impact is weaker in countries with overvalued exchange rates. Furthermore, we found that overvaluation reduces growth but its negative effect is ameliorated by financial development.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 4 ()
Pages: 681-700

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:4:p:681-700

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: Sub Saharan Africa; development assistance; economic growth; exchange rate misalignment;

References

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  12. Dhaneshwar Ghura & Anupam Basu & Evangelos A. Calamitsis, 1999. "Adjustment and Growth in Sub-Saharan Africa," IMF Working Papers 99/51, International Monetary Fund.
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Citations

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Cited by:
  1. Ibrahim Ahmed Elbadawi & Raimundo Soto, 2012. "Resource Rents, Political Institutions and Economic Growth," Documentos de Trabajo 413, Instituto de Economia. Pontificia Universidad Católica de Chile..
  2. Evžen Kocenda & Mathilde Maurel & Gunther Schnabl, 2012. "Short-Term and Long-Term Growth Effects of Exchange Rate Adjustment," CESifo Working Paper Series 4018, CESifo Group Munich.

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