Open AccessForeign Aid, Domestic Savings and Economic Growth in Selected MENA Countries
Author(s) -
Mahmoud M. Sabra,
Abdel Hakeem Eltalla
Publication year - 2016
Publication title -
business and economic research
Language(s) - English
Resource type - Journals
ISSN - 2162-4860
DOI - 10.5296/ber.v6i1.9204
Subject(s) - openness to experience , foreign direct investment , economics , panel data , investment (military) , international economics , international trade , development economics , macroeconomics , political science , psychology , social psychology , politics , law , econometrics
Foreign aid can have either a positive or a negative impact on economic growth. The role of foreign aid in supporting growth by completing domestic savings has been a subject of substantial argument. In this study, we explore the role of foreign aid, trade openness, investment, domestic savings and economic growth in eight MENA countries (Morocco, Algeria, Egypt, Palestine, Syria, Jordan, Lebanon and Tunisia) for the period from 1977 to 2013. The estimation has been done using simultaneous equation model and dynamic panel data system analysis. A negative relationship is found between economic growth and foreign aid. The negative impact of foreign aid on economic growth could be due to presence of Dutch disease and bad policy environment. In addition, foreign aid seems to crowd out domestic savings rather than complementing it. The effects of trade openness and domestic investment on economic growth are significantly positive.