Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars

Foreign aid, the real exchange rate (RER), and economic growth are three key variables that shape the aftermath of civil wars in many developing countries. Panel estimations drawn from a sample of 39 conflict and 44 nonconflict countries between 1970 and 2004 indicate that although postconflict coun...

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Main Authors:	Elbadawi, Ibrahim Ahmed, Kaltani, Linda, Schmidt-Hebbel, Klaus
Format:	Journal Article
Published:	World Bank 2012
Subjects:	adverse effect competitiveness currency assets Development Economics Economic Growth Economic Research Economics Research equilibrium export growth overvaluation
Online Access:	http://hdl.handle.net/10986/4474

id	okr-10986-4474
recordtype	oai_dc
spelling	okr-10986-44742021-04-23T14:02:18Z Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars Elbadawi, Ibrahim Ahmed Kaltani, Linda Schmidt-Hebbel, Klaus adverse effect competitiveness currency assets Development Economics Economic Growth Economic Research Economics Research equilibrium export growth overvaluation Foreign aid, the real exchange rate (RER), and economic growth are three key variables that shape the aftermath of civil wars in many developing countries. Panel estimations drawn from a sample of 39 conflict and 44 nonconflict countries between 1970 and 2004 indicate that although postconflict countries receive larger aid flows and exhibit moderate RER overvaluation after peace is attained, overvaluation cannot be traced to aid. Yet foreign aid is among the significant determinants of the equilibrium RER. Aid is also an important determinant of economic growth, particularly after peace is reached. Aid exhibits decreasing returns, however, and interacts negatively with RER overvaluation. RER overvaluation reduces growth, but this effect is ameliorated by financial development. Postconflict policies should therefore aim to use aid prudently, avoid RER misalignment, and support financial and capital market development to achieve high and stable growth in the aftermath of war and beyond. 2012-03-30T07:12:36Z 2012-03-30T07:12:36Z 2008-01-30 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/4474 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank World Bank Journal Article Africa Netherlands Antilles Chile Congo, Republic of
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	adverse effect competitiveness currency assets Development Economics Economic Growth Economic Research Economics Research equilibrium export growth overvaluation
spellingShingle	adverse effect competitiveness currency assets Development Economics Economic Growth Economic Research Economics Research equilibrium export growth overvaluation Elbadawi, Ibrahim Ahmed Kaltani, Linda Schmidt-Hebbel, Klaus Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
geographic_facet	Africa Netherlands Antilles Chile Congo, Republic of
description	Foreign aid, the real exchange rate (RER), and economic growth are three key variables that shape the aftermath of civil wars in many developing countries. Panel estimations drawn from a sample of 39 conflict and 44 nonconflict countries between 1970 and 2004 indicate that although postconflict countries receive larger aid flows and exhibit moderate RER overvaluation after peace is attained, overvaluation cannot be traced to aid. Yet foreign aid is among the significant determinants of the equilibrium RER. Aid is also an important determinant of economic growth, particularly after peace is reached. Aid exhibits decreasing returns, however, and interacts negatively with RER overvaluation. RER overvaluation reduces growth, but this effect is ameliorated by financial development. Postconflict policies should therefore aim to use aid prudently, avoid RER misalignment, and support financial and capital market development to achieve high and stable growth in the aftermath of war and beyond.
format	Journal Article
author	Elbadawi, Ibrahim Ahmed Kaltani, Linda Schmidt-Hebbel, Klaus
author_facet	Elbadawi, Ibrahim Ahmed Kaltani, Linda Schmidt-Hebbel, Klaus
author_sort	Elbadawi, Ibrahim Ahmed
title	Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
title_short	Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
title_full	Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
title_fullStr	Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
title_full_unstemmed	Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars
title_sort	foreign aid, the real exchange rate, and economic growth in the aftermath of civil wars
publisher	World Bank
publishDate	2012
url	http://hdl.handle.net/10986/4474
_version_	1764391523146792960

Foreign Aid, the Real Exchange Rate, and Economic Growth in the Aftermath of Civil Wars

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