عدم تنظیم نرخ ارز کمکی واقعی ، و رشد اقتصادی در کشورهای جنوب صحرای آفریقا

Generating sustained growth in Sub-Saharan Africa (SSA) is one of the most pressing challenges in global development. As the region clearly needs assistance to jump start its development, foreign aid becomes crucial. This paper investigates the nexus between foreign aid, exchange rate misalignment, and economic growth in SSA. Contrary to conventional wisdom, we do not find aid to be a major contributor to exchange rate overvaluation. In addition, we found that aid fosters growth but its impact is weaker in countries with overvalued exchange rates. Furthermore, we found that overvaluation reduces growth but its negative effect is ameliorated by financial development.

Generating sustained growth in Sub-Saharan Africa (SSA) is often cited as the most pressing challenge in global development. Given SSA’s disappointing growth record, analysts predict that most of its countries will not meet the Millennium Development Goals (MDGs) by 2015. Prompted by this concern, the international development community has been considering a major scaling up of development aid, especially for those relatively well-managed countries that demonstrate ownership of development programs and progress in governance and institutional capacity (World Bank, 2008). Scaled up aid is necessary for these countries to finance their pressing needs and to eventually achieve the MDGs. However, aid-recipient countries would need to spend aid wisely, which would require both economic management institutions and political processes for enforcing transparency and accountability. Donors also have to adopt aid delivery mechanisms that promote ownership, transparency, and stakeholders’ participation in the development process. These issues have already attracted considerable academic and policy interest. However, rapid aid surges—like commodity-price booms—could also pose serious challenges for macroeconomic stability, especially if they produce significant disequilibria in the real exchange rate (RER) and induce the well known “Dutch Disease” phenomenon. Aid is a key determinant of the RER, through its influence on domestic spending and saving decisions. The more aid is spent, the larger is spending on non-traded goods and services, and the larger is the share of aid that is saved to build up net domestic-currency public sector assets, the larger is the ensuing RER appreciation, with potential negative effects on output and employment—the so-called Dutch disease. In this context, excessive aid dependence could have a detrimental impact on non-traditional exports and thus undermine an effective source of dynamic growth. This is the main concern of this paper, where we ask the following pivotal question: what impact does real exchange rate misalignment, especially overvaluation, have on growth and aid effectiveness? As an economy-wide relative price (of traded to non traded goods), the RER acts as a signal for inter-sectoral resource transfers and factor movements (human capital, labor, and physical capital) and, thus, provides the incentives to economic agents that largely shape economic activity. Since resource relocation is usually a resource and time-consuming process, RER misalignment can be costly, especially when such changes are frequent or substantial, or when they do not correspond to equilibrium adjustments. During relocation resources may remain idle, in the form of unemployment or excess capacity, negatively affecting the living conditions of the population. The existing literature suggests that maintaining the RER close to its equilibrium level is a necessary condition for sustained growth and that countries that avoided overvaluation have been associated with sustained export-led growth and substantial export diversification (e.g., Elbadawi & Helleiner, 2005). Moreover, not only avoiding overvaluation is necessary for growth but a mild undervaluation may be good for growth (e.g., Aguirre & Calderon, 2005). Calamitsis, Basu, and Ghura (1999) point out the dual role of RER depreciation. On the upside, depreciation of the RER has a positive effect on growth by increasing capacity utilization and raising the profitability of traded goods sectors which in turn promotes private investment. Moreover, a depreciated currency provides an economy-wide incentive to new potential exportable products that might face high entry barriers under an excessively strong currency. Further, RER depreciation avoids the necessity of selecting beneficiaries for export subsidies (i.e., “picking winners”) as it promotes all exporting industries. On the downside, RER depreciation raises the cost of imported goods and since a large component of investment goods in developing economies is imported, such depreciation can dampen investment and lower growth. Recently Rodrik (2008) argued that these empirical findings are, in fact, a reflection of a deeper causal effect: countries that have managed to engineer an RER undervaluation (e.g., China, Republic of Korea, Taiwan, Uganda, and Tanzania) appear to have indirectly resolved (or provided a cushion against) deep institutional constraints. First, weak institutions create a wedge between private and social returns. Second, to the extent that traded goods may be more “complex” and entail more transaction-intensive activities, the wedge between private and social returns may be more severe in traded than non-traded economic activities and can lead to static misallocation of resources in favor of the latter and greater dynamic distortions in the former. When the traded-goods sector is more dynamic, as would be expected in many low-income, small economies, an increase in the relative prices of traded to non-traded goods can improve static efficiency and enhance growth in a second-best fashion. Therefore, RER undervaluation can be an alternative approach for alleviating the costs associated with such institutional weaknesses. Another theoretical justification for engineering an RER undervaluation strategy is based on the view that traded goods (particularly new and non-traditional ones) are subject to a variety of market imperfections, such as information externalities (learning and cost-discovery externalities) and coordination externalities. These imperfections keep output and investment in traded sectors at sub-optimal levels. Again, by raising profitability of traded sectors, an RER undervaluation can be an effective strategy for increasing growth in a second-best world. The above reviewed literature indicates the role of the RER as a growth fundamental and as a key ingredient for any successful export-oriented development strategy for low income countries. However, critics of the RER-led growth strategy argue that it is not feasible because the real exchange rate, being an endogenous relative price, is not an exogenous policy instrument at the disposal of economic authorities. On the other hand, more recently Levy-Yeyati and Sturzenegger (2007) have shown that sterilized intervention has been an effective instrument for achieving RER depreciation in the short-to medium terms. Moreover, even when recognizing that RER is not a direct policy instrument, proponents of the RER undervaluation—as a growth fundamental (e.g., Rodrik, 2008 and Williamson, 1997) or as a facilitator of economic expansion (e.g., Eichengreen, 2007)—argue that while the RER is endogenous, it can nevertheless be managed. For example, Rodrik (2007) proposes several policy levers that policy makers might deploy for managing the real exchange rate. Section 2 asks the key question as to why this study focuses on SSA and highlights the centrality of the RER in the overall development strategy of SSA. Section 3 reports estimation results for the determinants of the RER, based on a world sample of 83 countries and annual 1980–2004 data, focusing, among other fundamentals, on the role of aid. Given the focus on Africa, and as a robustness check of the relevance of the global model to this region, the same model is estimated for a sub-sample of only SSA countries. The main results on the determinants of the RER remain intact, especially with regard to the role of aid. This allows us to subsequently derive measures of RER equilibrium and RER misalignment in SSA and analyze the role of fundamentals versus other short-term error-correction factors. Probing further, Section 4 builds a typology of RER misalignment across groups of African countries and highlights structural and policy characteristics that may explain such behavior. Section 5 reports estimation results for a growth model based on a world sample of 77 countries and 5-year data spanning 1970–2004. We also check for robustness of the growth results, especially with regard to the impact of RER misalignment and its interaction with aid, against the choice of RER misalignment index as well as the period of estimation. In both cases the pivotal findings of the main primary results are found to hold. The growth specification allows testing for the influence of foreign aid and RER misalignment on growth, controlling for standard growth determinants and allowing for key interactions between aid, RER misalignment, and financial development. Section 6 contains a summary of the key findings.

The real exchange rate has played a central role in the development strategy of most countries, in particular when their ability to foster rapid TFP-driven growth is limited. This paper develops RER misalignment series for a large panel of countries and studies the empirical link between RER misalignment and growth while also exploring possible interaction effects between RER misalignment with foreign aid and financial development. This paper makes a number of important contributions. At the technical level this paper develops an objective criterion for calibrating the estimated equilibrium RER so that it satisfies the condition that the RER must on average be in equilibrium in the long-run. At the empirical level, though the evidence produced has wider applicability, we emphasize the implications for Africa, given its diversity of exchange rate regimes and its high dependence on foreign aid as well as its relatively underdeveloped financial sector. This paper’s first contribution is to build model-consistent RER misalignment series for a large panel of countries. The RER misalignment series are generated from error-correction estimations for the equilibrium RER, based on structural determinants. The empirical results—based on a world sample of annual 1980–2004 data for 83 countries—show that the long-run coefficients of all structural variables and short-run coefficients of some structural variables are significant and display expected signs according to theory. Moreover, the main results remain intact when the model is estimated for a sub-sample of only SSA countries to check its robustness. Higher long-term foreign aid and terms of trade are shown to contribute significantly to long-term RER appreciation. However, short-term changes in aid do not have significant effects on short-run RER behavior. We used the long-run regression results to compute RER misalignment series for each country and to decompose RER misalignment according to the contribution of deviations of fundamentals from their long-term trends and of short-term dynamics. Not surprisingly, short-term shocks explain most of the RER deviations from equilibrium levels. Aid deviations from trend values contribute particularly little to misalignment. This evidence makes clear that the development impact of aid is not likely to be adversely affected by its potential influence on macroeconomic competitiveness. This finding, we would argue, is an important contribution to the debate on aid effectiveness. The evidence provided in this paper suggests that those countries that have experienced some growth spurts were also likely to have been able to avoid disequilibrium real exchange rate overvaluation. In fact the evidence suggests an even stronger implication regarding exchange rate policy in that, not only overvaluation is bad for growth, but that undervaluation is good for the latter. Therefore, the econometric results of this paper are also highly relevant to the current debate about the role of the real exchange rate as a growth fundamental. The additional empirical evidence that this paper offers is based on a growth equation that nests the above variables within a standard specification, controlling for growth fundamentals that are robustly identified in the empirical growth literature. Empirical estimations, based on the dynamic system GMM estimator, provide support for several channels of transmission from aid to growth. Moreover, the core predictions of the RER-oriented growth model were found to be robust to how RER misalignment is measured as well as to the major shift in the policy regime since the 1980s decade. The linear positive effect of aid on growth supports the notion that recipient countries having access to foreign resources are likely to use aid to finance investment, improve policies, and raise aggregate efficiency. However, the negative non-linear effect also shows that aid has decreasing growth benefits, reflecting growing misuse and/or weakening absorptive capabilities of larger aid inflows. The paper has provided evidence against an indirect negative effect of aid on growth, via RER misalignment, showing that very little RER appreciation can be traced to exceptionally large aid inflows. Hence recent aid surges were not found to be a major contributor to Dutch Disease-type RER misalignment and lower growth. The preceding results are complemented by important interaction effects, which show that the negative growth impact of RER misalignment is intensified by aid and weakened by financial development. Hence aid lowers growth in a macroeconomic environment that allows for RER overvaluation. Deeper financial markets provide better protection to (traded-goods) firms against periods of RER overvaluation, possibly by supplying more credit or offering hedging instruments against RER risk. Therefore, the empirical evidence on growth presented in this paper reveals important findings about the role of aid and other key growth determinants, both individually and through interactions. Our results on the existence and determinants of moderate RER overvaluation for many countries experiencing aid surges and its negative impact on growth lead to recommend strengthening international competitiveness through appropriate macroeconomic policies. Avoiding excessive government spending has the benefit of raising growth, both directly and indirectly by reducing RER overvaluation. In the realm of structural policies, our results suggest that financial development and deepening—including banking and capital-market development—have a direct positive effect on long-term growth and an additional growth bonus by reducing the adverse growth impact of RER overvaluation. Hence financial development should be a high priority for these countries. This could include strengthening domestic banking, supporting development of domestic capital markets, and promoting development of financial instruments to protect against exchange-rate risk.