Abstract
This paper investigates the impact that a major investment project would have on the optimal investment strategy and the economy of a developing country. The multi-sector intertemporal planning model is formulated as a linear quadratic tracking problem where targets are set for the growth of the macroeconomic variables. Project demands are given exogenously. Model solutions for an irrigation project in Sri Lanka show that besides leading to a different investment strategy due to the project, tracking only the macro-variables leads to fluctuating investments.
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