Macroeconomic Stabilization and Economic Growth: The Case of Uganda
African Development Review, Vol. 17, No. 1, pp. 1-22, April 2005
Posted: 3 Dec 2005
This paper develops a computational general equilibrium model for analyzing some chronic economic problems facing developing countries. We build a multiperiod model with multiple types of capital and three different financial assets. Moreover, capital is sector specific to capture the idea that many developing countries focus on a few specific industry groups. We model both rural and urban consumers with the possibility of ruralurban migration. One further modeling feature is a partially interdependent banking sector where the performance of, say, the agricultural bank can affect the functioning of the industrial bank. The model is used to examine problems of budgetary liquidity and alternative ways of alleviating these problems. Our analysis is applied to Uganda, a country that after years of economic decline is undergoing a phase of recovery and reform. Accordingly, we develop a model that captures some of the predominant institutional features of the Ugandan economy and evaluate two realistic reform scenarios. After calibrating the model with a base case scenario we test the implications of a simultaneous tariff reduction and increase in value added taxes. We then look at the implication of debt reduction.
Keywords: Uganda, macro stablization
JEL Classification: O11, D58
Suggested Citation: Suggested Citation