Abstract

After the uranium boom of 1970–1980’s, Niger is experiencing a second round of a natural resources boom. Policy makers and civil societies are concerned about the impact of the resulting inflow of capital on macroeconomic variables and welfare. Recent studies have shown that countries with natural resources windfall as the main source of foreign exchange tend to grow more slowly than countries with exports led by manufactured goods. This is referred as the “Dutch Disease” problem. This study develops a dynamic general equilibrium model and utilizes it to quantify the effect of a uranium windfall on Niger’s economy. The result of the simulations shows that the uranium windfall improves household welfare and is growth promoting. However, income inequality increases and inflation rises. The policy implication of the study is that “Dutch Disease” can be avoided by spending the windfall strategically.

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