Aid, Disbursement Delays, and the Real Exchange Rate
Aid donors and recipients have long been concerned that aid inflows may lead to an appreciation of the real exchange rate and an associated loss of competitiveness. This paper provides new evidence of the dynamic effects of aid on the real exchange...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17919049/aid-disbursement-delays-real-exchange-rate http://hdl.handle.net/10986/15860 |
| Summary: | Aid donors and recipients have long been
concerned that aid inflows may lead to an appreciation of
the real exchange rate and an associated loss of
competitiveness. This paper provides new evidence of the
dynamic effects of aid on the real exchange rate, using an
identification strategy that exploits the long delays
between the approval of aid projects and the subsequent
disbursements on them. These disbursement delays enable the
isolation of a source of variation in aid inflows that is
uncorrelated with contemporaneous macroeconomic shocks that
may drive both aid and the real exchange rate. Using this
predetermined component of aid as an instrument, there is
little evidence that aid inflows lead to significant real
exchange rate appreciations. |
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