Aid, the Real Exchange Rate and Why Policy Matters: The Cases of Morocco and Tunisia
Document Type
Article
Publication Date
7-3-2017
Abstract
Every form of foreign-exchange inflow, including aid, can potentially cause real-exchange rate appreciation, with adverse consequences for the production of tradables (‘Dutch Disease’). Whether it does so depends on the policy response to the inflow. This paper investigates the issue for Morocco and Tunisia, over 1980–2009. We find that aid led to a real appreciation in Morocco, but had no effect on Tunisia’s real exchange rate. This confirms the importance of the macroeconomic framework in which aid is provided, and the key role for infrastructure and other supply-side improvements in determining the final real-economy impact of aid and other inflows.
Publication Title
Journal of Development Studies
Volume
53
Issue
7
First Page
1104
Last Page
1121
Digital Object Identifier (DOI)
10.1080/00220388.2017.1303673
ISSN
00220388
E-ISSN
17439140
Citation Information
Addison, & Baliamoune-Lutz, M. (2017). Aid, the Real Exchange Rate and Why Policy Matters: The Cases of Morocco and Tunisia. The Journal of Development Studies, 53(7), 1104–1121. https://doi.org/10.1080/00220388.2017.1303673