Aid-Financed Public Investments and the Dutch Disease: Evidence from Tanzania
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.
|Date of creation:||14 May 2008|
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- Peter S. Heller & Sanjeev Gupta, 2002. "Challenges in Expanding Development Assistance," IMF Policy Discussion Papers 02/5, International Monetary Fund.
- Arvind Subramanian & Raghuram Rajan, 2005.
"What Undermines Aid's Impacton Growth?,"
IMF Working Papers
05/126, International Monetary Fund.
- Yongzheng Yang & Robert Powell & Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 05/179, International Monetary Fund.
- 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.
- 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.
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