Oil Wealth and Potential Dutch Disease Effects in Uganda

Oil Wealth and Potential Dutch Disease Effects in Uganda
Based on the hypothesis that different spending options from oil inflows are likely to generate different Dutch disease effects, this study employs a dynamic Computable General Equilibrium Model to investigate how different spending options targeted at particular sectors would affect the competitiveness of the traded goods sector in Uganda. The results suggest, as expected, that increased oil resources would lead to significant currency appreciation in all scenarios. Also, in accordance with the theory's predictions it is found that the demand for non-tradable goods increases. However, for simulations where oil resources are used for productive activities, losses in competitiveness would be compensated by growth in other sectors. While investment in infrastructure could reinforce the Dutch disease effects given its strong impact on the appreciation of exchange rate and implications for higher demand for non-tradables, this is compensated for by the positive externalities generated for other sectors by having better public goods.
Date: 2011-06-13
Author: Lawrence Bategeka & John Mary Matovu
File Name: Oil Wealth and Potential Dutch Disease Effects in Uganda - RS 81.pdf
File Size: 1.27 MB
File Type: application/pdf
Created Date: 06-13-2011
RSS Feed