Agénor, Pierre-RichardBayraktar, Nihal ElAynaoui, Karim2012-06-222012-06-222005-01https://hdl.handle.net/10986/8892The authors develop a macroeconomic framework that captures links between aid, public investment, growth, and poverty. Public investment is disaggregated into education, infrastructure, and health, and affects both aggregate supply and demand. Dutch disease effects are captured by accounting for changes in the relative price of domestic goods. The authors assess the impact of policy shocks on poverty by linking the model to a household survey. They calibrate the model for Ethiopia and simulate the changes in the allocation of aid and public investment. The authors also calculate the amount by which foreign aid should increase to reach the poverty targets of the Millennium Development Goals.CC BY 3.0 IGOABSORPTIVE CAPACITYACCELERATORACCELERATOR EFFECTACCOUNTINGADVERSE EFFECTSAGGREGATE DEMANDAGGREGATE SUPPLYBALANCE OF PAYMENTSBARRIERS TO ENTRYBORROWINGCAPITAL FORMATIONCENTRAL BANKCOMPETITIVENESSCONDITIONALITYCONSUMPTION LEVELSCURRENCYDEBTDEBT RELIEFDEFICIT FINANCINGDEVELOPMENT ASSISTANCEDEVELOPMENT ECONOMICSDIMINISHING RETURNSDISPOSABLE INCOMEECONOMETRIC ESTIMATESECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC POLICIESECONOMISTSELASTICITIESELASTICITYELASTICITY OF SUBSTITUTIONEMPIRICAL EVIDENCEEQUILIBRIUMEXCHANGE RATEEXOGENOUS SHOCKSEXOGENOUS VARIABLESEXPENDITUREEXPORTSFINANCIAL MARKETSFORMAL ANALYSISFUNGIBILITYGDPGDP PER CAPITAGINI COEFFICIENTGROSS DOMESTIC PRODUCTGROWTH RATEHUMAN CAPITALHUMAN DEVELOPMENTIMPORTSINCOMEINCOME DISTRIBUTIONINTEREST PAYMENTSINTEREST RATEINTEREST RATESLABOR MARKETLABOR SUPPLYLINKAGESMACROECONOMIC EFFECTSMACROECONOMIC POLICIESMACROECONOMICSMARGINAL PRODUCTIVITYMARKET EQUILIBRIUMMARKET PRICESMORAL HAZARDMORAL HAZARD PROBLEMSPER CAPITA INCOMEPHYSICAL CAPITALPOLICY DECISIONSPOVERTY LINEPOWER PLANTSPRIVATE CONSUMPTIONPRIVATE INVESTMENTPRIVATE SECTORPRODUCTION COSTSPRODUCTION FUNCTIONPRODUCTION INPUTSPRODUCTION PROCESSPRODUCTIVITYPRODUCTIVITY GROWTHPUBLIC EXPENDITUREPUBLIC GOODSPUBLIC INVESTMENTPUBLIC SERVICESPUBLIC SPENDINGPUBLIC TRANSPORTATIONPURCHASESREAL GDPREAL INCOMEREAL WAGESSAFETYSAFETY NETSSAVINGSSIDE EFFECTSSTOCKSTAX REVENUETAX REVENUESTAXATIONTELECOMMUNICATIONSTERMS OF TRADETRADE POLICIESUNEMPLOYMENTVALUE OF OUTPUTWAGE FLEXIBILITYWorld Bank10.1596/1813-9450-3490