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

  • Asmah, Emmanuel E.

    ()

    (Department of Business, Economics, Statistics and Informatics)

  • Levin, Jorgen

    ()

    (Department of Business, Economics, Statistics and Informatics)

Registered author(s):

    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.

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    File URL: http://www.oru.se/PageFiles/15377/wp2008-03.pdf
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    Paper provided by Örebro University, School of Business in its series Working Papers with number 2008:3.

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    Length: 34 pages
    Date of creation: 14 May 2008
    Date of revision:
    Handle: RePEc:hhs:oruesi:2008_003
    Contact details of provider: Postal: Örebro University School of Business, SE - 701 82 ÖREBRO, Sweden
    Phone: 019-30 30 00
    Fax: 019-33 25 46
    Web page: http://www.oru.se/Institutioner/Handelshogskolan-vid-Orebro-universitet/

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    1. Arvind Subramanian & Raghuram Rajan, 2005. "What Undermines Aid's Impacton Growth?," IMF Working Papers 05/126, International Monetary Fund.
    2. Michael A. Clemens & Steven Radelet, 2003. "The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?," Working Papers 23, Center for Global Development.
    3. François Bourguignon & Mark Sundberg, 2006. "Constraints to Achieving the MDGs with Scaled-Up Aid," Working Papers 15, United Nations, Department of Economics and Social Affairs.
    4. Peter S. Heller & Sanjeev Gupta, 2002. "Challenges in Expanding Development Assistance," IMF Policy Discussion Papers 02/5, International Monetary Fund.
    5. Yongzheng Yang & Robert Powell & Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 05/179, International Monetary Fund.
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