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Aid allocation effects on growth and poverty: A CGE framework

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Author Info

  • Twimukye, Evarist P.
  • Nabiddo, Winnie
  • Matovu, John Mary

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.

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File URL: http://purl.umn.edu/54937
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Bibliographic Info

Paper provided by Economic Policy Research Centre (EPRC) in its series Research Series with number 54937.

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Date of creation: May 2009
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Handle: RePEc:ags:eprcrs:54937

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Related research

Keywords: Aid; Exchange rate; Dutch disease; Twimukye; Nabiddo; Matovu; Exports; Foreign aid; Poverty reduction; Economic policy research center; 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;

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Cited by:
  1. Buyinza, Faisal, 2011. "Performance and Survival of Ugandan Manufacturing firms in the context of the East African Community," Research Series 150477, Economic Policy Research Centre (EPRC).

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