Africa, while a major aid recipient, has had disappointing export performance. This paper argues for a causal link: aid, by being partially spent on non-traded goods, leads to real appreciation and reduced export competitiveness. I demonstrate the importance of this effect by presenting econometric evidence on the positive relation between aid flows and real exchange rate appreciation and increases in the real wage in the traded-goods sector. Policy implications are discussed.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
88.
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Suwa Eisenmann, Akiko & Verdier, Thierry, 2007.
"Aid and Trade,"
CEPR Discussion Papers
6465, C.E.P.R. Discussion Papers.
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