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Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses
Author:
Ms. Mwanza Nkusu
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Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 049
Language:
English
Publication Date:
01 Mar 2004
DOI:
https://doi.org/10.5089/9781451846874.001
ISBN:
9781451846874
ISSN:
1018-5941
Pages:
19
Keywords:
WP; Dutch disease model; appreciation; ODA; RER; Foreign Aid; Exchange Rate; Economic Growth; and Poverty; ODA flow; RER appreciation; Dutch disease-type effect; core Dutch disease theory; core Dutch disease framework; Dutch disease economics; ODA inflow; Dutch disease; Aid flows; Trade balance; Exports; Human capital; Sub-Saharan Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper demonstrates that the Dutch disease need not materialize in low-income countries that can draw on their idle productive capacity to satisfy the aid-induced increased demand. Diagnoses on, and prognoses for, the Dutch disease should take into account country-specific circumstances to avoid ill-advised policies. The paper emphasizes that using public resources inefficiently can be more painful than real exchange rate appreciations, which may not necessarily embody the Dutch disease.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund