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This paper uses a computable general equilibrium model Maquette for Millennium Development Goal Simulations (MAMS) calibrated to Mongolia to investigate how the development of major mining projects leads to Dutch disease. The simulations suggest that the process is complex, with the relative strength of the different spending and resource movement channels determined by structural features of the economy, such as factor input needs of the mining sector and substitution elasticities, and how mineral windfalls are eventually spent. In Mongolia, mining sector demand for domestic factor inputs explains two-thirds of the appreciation of the real exchange rate, with demand for labor, aquasi-fixed factor, the most potent channel for transmitting Dutch disease. The simulations also suggest that public policies may only play a limited role in limiting Dutch disease, even if growing fiscal revenues are channeled toward productivity-enhancing public investment rather than public consumption or lower taxes. This finding suggests that policy makers face real trade-offs, namely that, as an equilibrium response, Dutch disease is unavoidable and at odds with an export-led, manufacturing-oriented development strategy unless resources are left in the ground (or mining earnings are saved abroad). If the objective is to limit Dutch disease, then the simulations point to policies that minimize the usage of domestic inputs by the mining sector, or that accommodate the growing demand for key inputs such as labor e.g. through immigration. Regarding spending, policy makers should channel mining revenues toward public investment, to expand the economy's long-run supply potential. Where large direct income flows from the mining sector to households are important, monetary policy may be more useful than fiscal policy in constraining private spending.

CGE --- Computable General Equilibrium --- Dutch Disease --- Mams --- Mdgs --- Millennium Development Goal

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The economy of Moldova, which has one of the lowest levels of gross national income per capita in the World Bank Europe and Central Asia region, is strongly linked to the outside world, especially to the neighboring countries of the European Union and the Commonwealth of Independent States. This paper analyzes a set of scenarios for Moldova up to 2020, defined to shed light on issues related to an alternative future dominated by goods and services exports as opposed to today's reliance on worker remittances. The analysis is based on a Moldovan version of MAMS (Maquette for Millennium Development Goal Simulations), a CGE (Computable General Equilibrium) model for country strategy analysis. In sum, the impact of increased export demand and productivity growth is more positive when these shocks are directed to manufacturing, a sector more heavily linked to international trade, compared with agriculture. Increased productivity in transport and communications generates faster growth with widely diffused benefits, reaching households in a relatively equitable manner compared with foreign trade-induced growth. A comparison between adverse shocks in two areas, higher energy import prices, and lower remittances, designed to have similar effects on gross domestic product, suggests that a remittance shock leads to less of a poverty increase, related to the fact that remittance-receiving households are not highly vulnerable; among sectors, agriculture is most vulnerable due to heavy energy reliance. Finally, well-targeted transfer schemes may offer an effective tool for diffusing the benefits of economic growth to the whole population, perhaps also contributing to more general acceptance of structural change.

Computable General Equilibrium --- Currencies and Exchange Rates --- Debt Markets --- Development Strategy --- Economic Theory & Research --- Emerging Markets --- Labor Policies --- Macroeconomics and Economic Growth --- MAMS --- Poverty Reduction --- Moldova

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Once the current political crisis in Yemen has been resolved, it will be ever more urgent to speed up progress, including Millennium Development Goal (MDG) achievements. Drawing on simulations with the Maquette for MDG Simulations (MAMS), a model for strategy analysis, and a linked microsimulation model, this paper addresses Yemen's MDG challenges. A first simulation set considers scaled-up government actions with the aim of fully achieving the 2015 international MDG targets with required additional financing from foreign or domestic sources. The main finding is sobering but not surprising: given the required expansion of MDG-related services, on-time achievement of key MDG targets does not appear to have been a realistic objective even if the government, hypothetically, would have expanded services with grant aid financing starting from 2005; macroeconomic stability, government efficiency, and the production of tradables would all have suffered due to the size of spending and aid increases as well as the resulting real exchange rate appreciation. The results suggest that countries, instead of relying on international targets, should set MDG targets grounded in their own reality. In light of these results, the authors designed a second simulation set that is focused on the remaining period up to 2015, and on what may be feasible once the current conflict has been settled. The simulations introduce moderate increases in foreign aid or government allocative efficiency. The government uses the resulting fiscal space for spending and service expansion in infrastructure and human development without losses in productive efficiency. The results suggest that, under these conditions, substantial improvements could still be achieved.

Computable General Equilibrium --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Macroeconomics and Economic Growth --- MAMS --- Millennium Development Goals --- Population Policies --- Public Sector Economics --- Yemen

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This paper explores the use of fiscal policy to accelerate development in Pakistan during the period 2013-2022, with a focus on the creation of fiscal space for increased investment in infrastructure, as well as on indicators related to macro and sectoral developments, Millennium Development Goals (MDGs), and education. In terms of method, the analysis relies on simulations with a Pakistani version of MAMS (Maquette for MDG Simulations), a Computable General Equilibrium model developed at the World Bank for country strategy analysis. The different policy scenarios point to the importance of selecting infrastructure projects with high productivity effects and the crucial role of financing in determining the net effects of expanded government infrastructure spending. Transfer programs can generate immediate welfare gains but are less effective over time unless they are designed to raise productivity, perhaps via improvements in health, nutrition, and education outcomes. A final high-growth scenario explores requirements and consequences for Pakistan's economy if, during the period 2013-2022, it managed to raise its rate of annual GDP growth from the 4-5 percent range to 7 percent. The results for the final scenario indicate that rapid growth acceleration may be achieved via a combination of strong increases in savings, investment and total factor productivity. By 2022, 10 years of growth at a rate of 7 percent would spread across the macro demand indicators as well as the major production sectors. Its effects would include significant, broader gains in terms of poverty reduction and better outcomes for indicators.

Banks & Banking Reform --- Computable General Equilibrium --- Currencies and Exchange Rates --- Debt Markets --- Development Strategy --- Economic Theory & Research --- Emerging Markets --- Macroeconomics and Economic Growth --- MAMS --- Poverty Reduction --- Pakistan

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In recent years, world food prices have increased and fluctuated widely. This paper explores the impact of international food prices and domestic policies on Millennium Development Goal (MDG) and macro indicators for two archetype low-income countries, a net food exporter and a net food importer, using Maquette for MDG Simulations (MAMS), a Computable General Equilibrium model. The simulations, which cover the period 2011-2025, indicate that the size of positive (negative) effects on macro and MDG indicators of a food export (import) price increase depend on the initial gross domestic product share for food exports (imports), leaving countries that are heavily involved in international food trade more exposed to international shocks. Given relatively low elasticity estimates, the impact of changes in food prices on undernourishment are relatively marginal. Flexible responses (in terms of production shares, whether output is exported or sold at home, and whether domestic demanders buy imports or domestic output) enable countries to benefit from or be less hurt by price changes. The case for policy responses to higher import prices is stronger for the net food importer. An untargeted food subsidy, financed by taxes or spending cuts, reduces undernourishment at the cost of a slight deterioration for most other indicators. By contrast, aid-financed food subsidies neutralize the negative impact of higher import prices whereas financing via domestic borrowing is counterproductive, leading to a deterioration across all indicators. If administered at moderate costs, tax-financed targeted transfers more effectively reduce headcount poverty and inequality with macroeconomic repercussions similar to those of tax-financed subsidies.

Computable General Equilibrium --- Currencies and Exchange Rates --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Food & Beverage Industry --- Macroeconomics and Economic Growth --- MAMS Sector board --- Millennium Development Goals --- Social Development --- Economic Policy --- Yemen