Aid and the Dutch Disease in Low-Income Countries: Informed Diagnoses for Prudent Prognoses
19 Pages Posted: 14 Feb 2006
Date Written: March 2004
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.
Keywords: Foreign Aid, Exchange Rate, Economic Growth, Poverty
JEL Classification: F35, F43, I30, O40
Suggested Citation: Suggested Citation