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

Author

Listed:
  • Asmah, Emmanuel E.

    (Department of Business, Economics, Statistics and Informatics)

  • Levin, Jorgen

    (Department of Business, Economics, Statistics and Informatics)

Abstract

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.

Suggested Citation

  • Asmah, Emmanuel E. & Levin, Jorgen, 2008. "Aid-Financed Public Investments and the Dutch Disease: Evidence from Tanzania," Working Papers 2008:3, Örebro University, School of Business.
    • Handle: RePEc:hhs:oruesi:2008_003
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    References listed on IDEAS

    as
    1. Raghuram G. Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," NBER Working Papers 11657, National Bureau of Economic Research, Inc.
    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. Mr. Peter S. Heller & Mr. Sanjeev Gupta, 2002. "Challenges in Expanding Development Assistance," IMF Policy Discussion Papers 2002/005, International Monetary Fund.
    4. Yongzheng Yang & Mr. Robert Powell & Mr. Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 2005/179, International Monetary Fund.
    5. 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.
    6. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
    7. Mr. Peter S. Heller, 2005. "Pity the Finance Minister: Issues in Managing a Substantial Scaling-Up of Aid Flows," IMF Working Papers 2005/180, International Monetary Fund.
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    Cited by:

    1. World Bank, 2010. "Malawi - Country Economic Memorandum : Seizing Opportunities for Growth through Regional Integration and Trade - Summary of Main Finding and Recommendations," World Bank Publications - Reports 2954, The World Bank Group.

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    More about this item

    Keywords

    Aid:Dutch:Disease:Tanzania;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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