Discussion Paper Details

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Title: Aid, Export Promotion and the Real Exchange Rate: An African Dilemma?

Author(s): Sweder van Wijnbergen

Publication Date: December 1985

Keyword(s): Africa, Development Aid, Export Performance, Real Exchange Rate Appreciation and Traded and Non-Traded Goods

Programme Area(s): International Trade and Regional Economics

Abstract: Africa, while a major aid recipient, has had disappointing export performance. This paper argues for a causal link: aid, by being partially spent on non-traded goods, leads to real appreciation and reduced export competitiveness. I demonstrate the importance of this effect by presenting econometric evidence on the positive relation between aid flows and real exchange rate appreciation and increases in the real wage in the traded-goods sector. Policy implications are discussed.

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Bibliographic Reference

van Wijnbergen, S. 1985. 'Aid, Export Promotion and the Real Exchange Rate: An African Dilemma?'. London, Centre for Economic Policy Research.