Macroeconomic challenges of scaling up aid to West African Economic and Monetary Union

Abstract

AbstractThe increase in Official Development Assistance for which the international community has mobilised should enable developing countries such as those of the West African Economic and Monetary Union to have the resources to achieve sustainable development goals and, more recently, to deal with the Coronavirus crisis. But this ‘Big Push’ of aid presents several macroeconomic challenges that this paper simulates using a dynamic stochastic general equilibrium model. The results showed that an increase in aid to West African Economic and Monetary Union countries translates into an increase in output and labour input. On the other hand, increased aid leads to an appreciation of the real exchange rate and a widening of the budget deficit.