We analyze some potential adverse macroeconomic side-effects of aid transfers: Real appreciation of the recipient’s currency may impair the aggregate output via crowding-out productive export sectors, the so-called Dutch Disease. We use simplified balance sheets to elucidate the effects of...

Summary We analyze some potential adverse macroeconomic side-effects of aid transfers: Real appreciation of the recipient′s currency may impair the aggregate output via crowding-out productive export sectors, the so-called Dutch Disease. We use simplified balance sheets to elucidate the...