Aid-Financed Public Investments and the Dutch Disease: Evidence from Tanzania

Emmanuel Asmah () and Jorgen Levin ()
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Jorgen Levin: Department of Business, Economics, Statistics and Informatics, Postal: Örebro University, Swedish Business School, SE - 701 82 ÖREBRO, Sweden

No 2008:3, Working Papers from Örebro University, School of Business

Abstract: In this paper we discuss the impact of scaling-up aid in Tanzania using an economy-wide dynamic CGE model. The major conclusions coming out from this work is that productivity effects matter. If additional aid and consequently increased public spending has a positive impact on productivity this would spur GDP growth and reduce the risk of an appreciating real exchange rate. In a way this resembles previous results in the aid-growth literature that aid has a positive impact on growth in a country with good economic policies assuming that good policies have a positive impact on productivity. Presenting various scenarios on the impact of additional aid a sustained GDP growth rate of around 7 percent would be possible to achieve in a modest scaling-up aid scenario without any significant changes in the real exchange rate.

Keywords: Aid:Dutch:Disease:Tanzania (search for similar items in EconPapers)
JEL-codes: F35 O11 O55 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-05-14
New Economics Papers: this item is included in nep-afr and nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:oruesi:2008_003

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