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Aid, Export Promotion and the Real Exchange Rate: An African Dilemma?

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  • van Wijnbergen, Sweder

Abstract

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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 88.

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Date of creation: Dec 1985
Date of revision:
Handle: RePEc:cpr:ceprdp:88

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Related research

Keywords: Africa; Development Aid; Export Performance; Real Exchange Rate Appreciation; Traded and Non-Traded Goods;

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Citations

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Cited by:
  1. Christopher S. Adam & Stephen A. O'Connell, 2000. "Aid versus trade revisited," CSAE Working Paper Series 2000-19, Centre for the Study of African Economies, University of Oxford.
  2. White, Howard & Luttik, Joke & DEC, 1994. "The countrywide effects of aid," Policy Research Working Paper Series 1337, The World Bank.
  3. Mwanza Nkusu & Selin Sayek, 2004. "Local Financial Development and the Aid-Growth Relationship," IMF Working Papers 04/238, International Monetary Fund.
  4. Belshaw, Deryke & Lawrence, Peter & Hubbard, Michael, 1999. "Agricultural Tradables and Economic Recovery in Uganda: The Limitations of Structural Adjustment in Practice," World Development, Elsevier, vol. 27(4), pages 673-690, April.
  5. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  6. Suwa Eisenmann, Akiko & Verdier, Thierry, 2007. "Aid and Trade," CEPR Discussion Papers 6465, C.E.P.R. Discussion Papers.
  7. Rajan, Raghuram G. & Subramanian, Arvind, 2011. "Aid, Dutch disease, and manufacturing growth," Journal of Development Economics, Elsevier, vol. 94(1), pages 106-118, January.
  8. Suwa-Eisenmann, Akiko & Verdier, Thierry, 2005. "Policy coherence for development: trade policies," CEPREMAP Working Papers (Docweb) 0519, CEPREMAP.
  9. Agenor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2005. "Roads out of poverty? assessing the links between aid, public investment, growth, and poverty reduction," Policy Research Working Paper Series 3490, The World Bank.

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