Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81016
Authors: 
Roe, Alan R.
Year of Publication: 
2011
Series/Report no.: 
WIDER Working Paper 2011/95
Abstract: 
This study assesses the fiscal and monetary management challenges that can be associated with large inflows of foreign aid. It provides a brief overview of the literature on Dutch Disease (DD) as applied to mineral wealth and then assesses the conventional policy responses that are available to mitigate the main problems that can be caused by DD. This discussion incorporates an identification of the additional issues and transmission mechanisms that arise when the source of DD is a surge in foreign aid. This analysis is designed to illuminate the circumstances in which an aid-induced DD effect is likely to call for countervailing macroeconomic policy interventions, and when other approaches may be more appropriate. The study concludes with an empirical assessment of the relative importance of mineral-based and aid-based DD problems in low- and middle-income economies. It suggests - contrary to the mainstream literature - that foreign aid and mineral exports typically create joint macroeconomic management problems for such countries.
Subjects: 
Aid
Dutch disease
monetary policy
fiscal policy
JEL: 
E62
F35
O23
Q38
ISBN: 
978-929-230-462-1
Document Type: 
Working Paper

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