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Aid and the Dutch-Disease in Ethiopia

Abstract: 

The paper analyses the "Dutch Disease" effect of foreign aid on the Ethiopian economy. After a brief review of aid theory, it goes on reviewing the available evidences about the Dutch disease effects aid has in the other countries. Then illustrative model is presented. The study employed three stage-least square methods in estimating the real exchange and aid variable, on the one hand, and export performance and aid, on the other. The finding is that external aid inflows to Ethiopia result in appreciation of the real exchange rate and hence loss of export competitiveness, that is, "Dutch Disease" problem has been identified. The study concludes that for external aid inflows to be an effective investment, economic policy needs to focus on infrastructure development and the government needs to subsidize firms in the tradable sector.

Corporate Author: 
Getnet Alemu & [et.al.]. & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: 
Ethiopian Economic Association (EEA)
Primary Descriptors: 

AID; Dutch-Disease

Secondary Descriptor: 

External AID Inflow

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
Foreign AID
Call Number: 
330.963 PRO 2006
Serial Key Title: 
Proceedings of the Third International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2013-05-27 23:06:00
Forum or Discussion date: 
2013-02-27 15:02:02
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy