Foreign Aid, Exchange Rate Regime, and Agricultural Trade
26 Pages Posted: 15 Dec 2022
Date Written: November 29, 2022
This study investigates the relationship between foreign aid and agricultural exports in recipient countries. Using the constructed data from 47 countries in the period of 2001--2018, we first find that foreign aid inflows in the form of official development assistance (ODA) cause an appreciation of the real exchange rate in recipient countries, particularly in low-income countries with floating exchange rate regimes. Our results further uncover that foreign aid inflow unexpectedly leads to a decrease in agricultural exports in agrarian recipient countries through the channel of exchange rate appreciation.
Keywords: Foreign Aid, Official Development Assistance, Exchange Rate, Agricultural Trade, Exports
JEL Classification: B17, F14, F35, O24, P33, Q17
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