01997cas a2200253 a 4500 AALejournalIMF004204 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451864052 1018-5941 BD-DhAAL BD-DhAAL Tressel, Thierry. Aid Volatility and Dutch Disease : Is There a Role for Macroeconomic Policies? / Thierry Tressel, Alessandro Prati. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (65 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper studies how macroeconomic policies can help offset two unintended and undesirable features of foreign aid: its volatility and Dutch disease. We present evidence that aid volatility augments trade balance volatility and that foreign aid, with the important exception of years of adverse shocks, depresses exports. We also find that these effects can be mitigated through changes in net domestic assets of the central bank-a variable that reflects both monetary and fiscal policy. To characterize the optimal policy, we develop a general equilibrium model in which the capital account is closed and aid influences productivity growth through positive (public expenditure) and negative (Dutch disease) externalities. In this setting, macroeconomic policies permanently affect real variables and can improve welfare if donors do not distribute foreign aid optimally over time. Mode of access: Internet Prati, Alessandro. IMF Working Papers; Working Paper ; No. 2006/145 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/145/001.2006.issue-145-en.xml IMF e-Library