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...

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Main Authors:	Jarotschkin, Alexandra, Kraay, Aart
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	AUTOREGRESSION BANK LENDING BENCHMARK BID BLACK MARKET CAPITAL INFLOWS CD CENTRAL BANKS CHECKS COMPETITIVENESS COUNTRY FIXED EFFECTS COUNTRY SAMPLE CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DEFLATORS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISBURSEMENTS DISEQUILIBRIUM DOMESTIC FINANCIAL MARKETS DOMESTIC PRICE DOMESTIC PRICE LEVEL ECONOMIC PERFORMANCE ECONOMIC REVIEW ELASTICITY ELASTICITY OF SUPPLY EMPIRICAL EVIDENCE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXPORT SECTOR EXTERNALITY FINANCIAL MARKETS FINANCIAL SUPPORT FIXED EXCHANGE RATE FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIME FLEXIBLE EXCHANGE RATE REGIMES FOREIGN EXCHANGE GDP GOVERNMENT SPENDING HIGH INFLATION INCOME INCOME COUNTRIES INDIVIDUAL LOANS INDUSTRIALIZATION INSTRUMENT INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL MONETARY FUND LOAN LOAN APPROVAL LOAN APPROVALS LONG TERM M1 M2 MACROECONOMIC CRISIS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC SHOCKS MACROECONOMICS MONETARY FUND MONETARY POLICY MULTILATERAL TRADE MULTIPLIERS NOMINAL EXCHANGE RATE OPEN ECONOMY OVERVALUATION POLICY RESEARCH POLICY RESPONSE POVERTY REDUCTION PRICE LEVELS PUBLIC SPENDING REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES RELATIVE PRICE REPAYMENTS RESERVE RESERVES SIDE EFFECTS SMALL COUNTRIES TECHNICAL ASSISTANCE TRANSFER PARADOX UNDERVALUATION WORLD ECONOMY Dutch disease aid
Online Access:	http://documents.worldbank.org/curated/en/2013/06/17919049/aid-disbursement-delays-real-exchange-rate http://hdl.handle.net/10986/15860

id	okr-10986-15860
recordtype	oai_dc
spelling	okr-10986-158602021-04-23T14:03:23Z Aid, Disbursement Delays, and the Real Exchange Rate Jarotschkin, Alexandra Kraay, Aart AUTOREGRESSION BANK LENDING BENCHMARK BID BLACK MARKET CAPITAL INFLOWS CD CENTRAL BANKS CHECKS COMPETITIVENESS COUNTRY FIXED EFFECTS COUNTRY SAMPLE CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DEFLATORS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISBURSEMENTS DISEQUILIBRIUM DOMESTIC FINANCIAL MARKETS DOMESTIC PRICE DOMESTIC PRICE LEVEL ECONOMIC PERFORMANCE ECONOMIC REVIEW ELASTICITY ELASTICITY OF SUPPLY EMPIRICAL EVIDENCE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXPORT SECTOR EXTERNALITY FINANCIAL MARKETS FINANCIAL SUPPORT FIXED EXCHANGE RATE FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIME FLEXIBLE EXCHANGE RATE REGIMES FOREIGN EXCHANGE GDP GOVERNMENT SPENDING HIGH INFLATION INCOME INCOME COUNTRIES INDIVIDUAL LOANS INDUSTRIALIZATION INSTRUMENT INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL MONETARY FUND LOAN LOAN APPROVAL LOAN APPROVALS LONG TERM M1 M2 MACROECONOMIC CRISIS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC SHOCKS MACROECONOMICS MONETARY FUND MONETARY POLICY MULTILATERAL TRADE MULTIPLIERS NOMINAL EXCHANGE RATE OPEN ECONOMY OVERVALUATION POLICY RESEARCH POLICY RESPONSE POVERTY REDUCTION PRICE LEVELS PUBLIC SPENDING REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES RELATIVE PRICE REPAYMENTS RESERVE RESERVES SIDE EFFECTS SMALL COUNTRIES TECHNICAL ASSISTANCE TRANSFER PARADOX UNDERVALUATION WORLD ECONOMY Dutch disease aid 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. 2013-09-26T15:57:17Z 2013-09-26T15:57:17Z 2013-05 http://documents.worldbank.org/curated/en/2013/06/17919049/aid-disbursement-delays-real-exchange-rate http://hdl.handle.net/10986/15860 English en_US Policy Research Working Paper;No. 6501 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AUTOREGRESSION BANK LENDING BENCHMARK BID BLACK MARKET CAPITAL INFLOWS CD CENTRAL BANKS CHECKS COMPETITIVENESS COUNTRY FIXED EFFECTS COUNTRY SAMPLE CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DEFLATORS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISBURSEMENTS DISEQUILIBRIUM DOMESTIC FINANCIAL MARKETS DOMESTIC PRICE DOMESTIC PRICE LEVEL ECONOMIC PERFORMANCE ECONOMIC REVIEW ELASTICITY ELASTICITY OF SUPPLY EMPIRICAL EVIDENCE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXPORT SECTOR EXTERNALITY FINANCIAL MARKETS FINANCIAL SUPPORT FIXED EXCHANGE RATE FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIME FLEXIBLE EXCHANGE RATE REGIMES FOREIGN EXCHANGE GDP GOVERNMENT SPENDING HIGH INFLATION INCOME INCOME COUNTRIES INDIVIDUAL LOANS INDUSTRIALIZATION INSTRUMENT INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL MONETARY FUND LOAN LOAN APPROVAL LOAN APPROVALS LONG TERM M1 M2 MACROECONOMIC CRISIS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC SHOCKS MACROECONOMICS MONETARY FUND MONETARY POLICY MULTILATERAL TRADE MULTIPLIERS NOMINAL EXCHANGE RATE OPEN ECONOMY OVERVALUATION POLICY RESEARCH POLICY RESPONSE POVERTY REDUCTION PRICE LEVELS PUBLIC SPENDING REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES RELATIVE PRICE REPAYMENTS RESERVE RESERVES SIDE EFFECTS SMALL COUNTRIES TECHNICAL ASSISTANCE TRANSFER PARADOX UNDERVALUATION WORLD ECONOMY Dutch disease aid
spellingShingle	AUTOREGRESSION BANK LENDING BENCHMARK BID BLACK MARKET CAPITAL INFLOWS CD CENTRAL BANKS CHECKS COMPETITIVENESS COUNTRY FIXED EFFECTS COUNTRY SAMPLE CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DEFLATORS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENT DISBURSEMENTS DISEQUILIBRIUM DOMESTIC FINANCIAL MARKETS DOMESTIC PRICE DOMESTIC PRICE LEVEL ECONOMIC PERFORMANCE ECONOMIC REVIEW ELASTICITY ELASTICITY OF SUPPLY EMPIRICAL EVIDENCE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXPORT SECTOR EXTERNALITY FINANCIAL MARKETS FINANCIAL SUPPORT FIXED EXCHANGE RATE FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIME FLEXIBLE EXCHANGE RATE REGIMES FOREIGN EXCHANGE GDP GOVERNMENT SPENDING HIGH INFLATION INCOME INCOME COUNTRIES INDIVIDUAL LOANS INDUSTRIALIZATION INSTRUMENT INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL MONETARY FUND LOAN LOAN APPROVAL LOAN APPROVALS LONG TERM M1 M2 MACROECONOMIC CRISIS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC SHOCKS MACROECONOMICS MONETARY FUND MONETARY POLICY MULTILATERAL TRADE MULTIPLIERS NOMINAL EXCHANGE RATE OPEN ECONOMY OVERVALUATION POLICY RESEARCH POLICY RESPONSE POVERTY REDUCTION PRICE LEVELS PUBLIC SPENDING REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATES RELATIVE PRICE REPAYMENTS RESERVE RESERVES SIDE EFFECTS SMALL COUNTRIES TECHNICAL ASSISTANCE TRANSFER PARADOX UNDERVALUATION WORLD ECONOMY Dutch disease aid Jarotschkin, Alexandra Kraay, Aart Aid, Disbursement Delays, and the Real Exchange Rate
relation	Policy Research Working Paper;No. 6501
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Jarotschkin, Alexandra Kraay, Aart
author_facet	Jarotschkin, Alexandra Kraay, Aart
author_sort	Jarotschkin, Alexandra
title	Aid, Disbursement Delays, and the Real Exchange Rate
title_short	Aid, Disbursement Delays, and the Real Exchange Rate
title_full	Aid, Disbursement Delays, and the Real Exchange Rate
title_fullStr	Aid, Disbursement Delays, and the Real Exchange Rate
title_full_unstemmed	Aid, Disbursement Delays, and the Real Exchange Rate
title_sort	aid, disbursement delays, and the real exchange rate
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2013/06/17919049/aid-disbursement-delays-real-exchange-rate http://hdl.handle.net/10986/15860
_version_	1764431650681257984

Aid, Disbursement Delays, and the Real Exchange Rate

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