International aid has an ambiguous effect on the macro-economy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production....

International aid has an ambiguous effect on the macroeconomy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production. However,...