Impact of Infrastructure Spending in Mali: A CGE Modeling Approach

Antonio Estache, Jean-Francois Perrault and Luc Savard

No 2009_009, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in an African country. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analyst raise concern on financing these infrastructures after construction and that external funding of these can create major distortion and have a negative impact on the trade balance of these countries. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that foreign aid does produce Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed. Moreover, growth effects contribute to attenuate the negative effects.

Keywords: Investment externalities; foreign aid; exchange rate; fiscal reforms (search for similar items in EconPapers)
JEL-codes: C68 E62 F35 H54 (search for similar items in EconPapers)
Pages: 25 p.
Date: 2009
New Economics Papers: this item is included in nep-afr, nep-cmp and nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Impact of Infrastructure Spending in Mali: A CGE modeling approach (2007)
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