Aid allocation effects on growth and poverty: A CGE framework

Evarist P. Twimukye, Winnie Nabiddo and John Mary Matovu

No 54937, Research Series from Economic Policy Research Centre (EPRC)

Abstract: It has been argues that increased aid causes Dutch disease as a result of appreciation of the exchange rate which reduces the competitiveness of the country's exports. In this paper, we argue that if the aid is used productively, there are both short and long term gains. Applying a recursive dynamic general equilibrium model on Uganda, we find that while the currency appreciates and some exports decline, the overall impact on growth outweighs the losses in competitiveness. In addition, it aid is used productively, poverty would be substantially reduced as long as the aid increase is sustained.

Keywords: Community/Rural/Urban Development; Consumer/Household Economics; Demand and Price Analysis; Financial Economics; International Development; Labor and Human Capital; Production Economics; Productivity Analysis; Public Economics (search for similar items in EconPapers)
Pages: 42
Date: 2009-05
New Economics Papers: this item is included in nep-afr and nep-cmp
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:eprcrs:54937

DOI: 10.22004/ag.econ.54937

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