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Aid and Dutch Disease in the South Pacific and in Other Small Island States

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  • David Fielding

Abstract

The impact of aid on the macro-economy is ambiguous. Aid that increases expenditure may cause real exchange rate appreciation. However, if the capital stock in the traded goods sector rises then output might not contract, and if investment in the non-traded goods sector is relatively productive then real exchange rate appreciation could be avoided. We examine aid inflows in 10 Pacific island states, and find them to produce a variety of outcomes. Applying our model to other small island states around the world, we analyse the country-specific characteristics that determine the macroeconomic impact of aid, and draw policy conclusions.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 46 (2010)
Issue (Month): 5 ()
Pages: 918-940

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Handle: RePEc:taf:jdevst:v:46:y:2010:i:5:p:918-940

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Cited by:
  1. Clausen, Volker & Schürenberg-Frosch, Hannah, 2012. "Aid, spending strategies and productivity effects: A multi-sectoral CGE analysis for Zambia," Economic Modelling, Elsevier, Elsevier, vol. 29(6), pages 2254-2268.
  2. Christos Nikas & Student Anastasia Blouchoutzi, 2014. "Emigrants’ Remittances and the “Dutch Disease” in Small Transition Economies: the Case Of Albania and Moldova," Romanian Statistical Review, Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 45-65, March.
  3. Ogundipe, Adeyemi & Ogundipe, Oluwatomisin, 2013. "Is Aid Really Dead? Evidences from Sub-Saharan Africa," MPRA Paper 51694, University Library of Munich, Germany.

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