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Growth and Welfare Effects of Macroeconomic Shocks in Uganda

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  • Edward, Batte Sennoga
  • John Mary, Matovu

Abstract

Using a computable general equilibrium model, this paper examines the growth and welfare effects of three macroeconomic shocks in Uganda during the period 2010 17:changes in terms of trade, changes in international oil prices, and changes in development assistance inflows. Our analysis reveals four key findings. First, the largely positive impact of these three shocks on agriculture and services appears to offset the negative impact on industry leading to minimal deviations in real GDP growth from the business-as usual scenario. Moreover, the three shocks only lead to short-term as opposed to permanent deviations from trend growth in real GDP. Second, the three shocks are transmitted to the domestic economy and real GDP growth through changes in the terms of trade, exchange rate, and cost of production. Third, household welfare decreases and remains below the business-as-usual scenario during the entire simulation. Fourth, the poverty reduction rate is lower under the three external shocks compared to the business-as-usual scenario.

Suggested Citation

  • Edward, Batte Sennoga & John Mary, Matovu, 2016. "Growth and Welfare Effects of Macroeconomic Shocks in Uganda," Occasional Papers 244096, Economic Policy Research Centre (EPRC).
  • Handle: RePEc:ags:eprcop:244096
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    File URL: http://ageconsearch.umn.edu/record/244096/files/39%20Growth%20and%20Welfare%20Effects%20of%20Macroeconomic%20Shocks%20in%20Uganda.pdf
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    References listed on IDEAS

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    2. Mendoza, Enrique G, 1995. "The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 101-137, February.
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    4. Rob Vos & Marco V. Sánchez, 2010. "A non-parametric microsimulation approach to assess changes in inequality and poverty," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 8-23.
    5. Ricardo Hausmann & Michael Gavin, 1996. "Securing Stability and Growth in a Shock Prone Region: The Policy Challenge for Latin America," Research Department Publications 4020, Inter-American Development Bank, Research Department.
    6. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
    7. John Cockburn & Luc Savard & Luca Tiberti, 2014. "Macro-Micro Models," Contributions to Economic Analysis,in: Handbook of Microsimulation Modelling, volume 127, pages 275-304 Emerald Publishing Ltd.
    8. Chris Papageorgiou & Hans Weisfeld & Catherine A Pattillo & Martin Schindler & Nikola Spatafora & Andrew Berg, 2011. "Global Shocks and their Impacton Low-Income Countries; Lessons From theglobal Financial Crisis," IMF Working Papers 11/27, International Monetary Fund.
    9. M. Ayhan Kose & Raymond Riezman, 2013. "Trade shocks and macroeconomic fluctuations in Africa," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 19, pages 369-394 World Scientific Publishing Co. Pte. Ltd..
    10. Decaluwé, Bernard & Dumont, Jean-Christophe & Savard, Luc, 2000. "Measuring Poverty and Inequality in a Computable General Equilibrium Model," Cahiers de recherche 9926, Université Laval - Département d'économique.
    11. Jansen, Marion & Lennon, Carolina & Piermartini, Roberta, 2009. "Exposure to External Country Specific Shocks and Income Volatility," CEPR Discussion Papers 7123, C.E.P.R. Discussion Papers.
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    13. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
    14. Ricardo Hausmann & Michael Gavin, 1996. "Securing Stability and Growth in a Shock Prone Region: The Policy Challenge for Latin America," Research Department Publications 4020, Inter-American Development Bank, Research Department.
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    Keywords

    Environmental Economics and Policy; Labor and Human Capital; Public Economics; Resource /Energy Economics and Policy;

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