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Aid allocation effects on growth and poverty: A CGE framework

Author

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  • 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.

Suggested Citation

  • Twimukye, Evarist P. & Nabiddo, Winnie & Matovu, John Mary, 2009. "Aid allocation effects on growth and poverty: A CGE framework," Research Series 54937, Economic Policy Research Centre (EPRC).
    • Handle: RePEc:ags:eprcrs:54937
    DOI: 10.22004/ag.econ.54937
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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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