Foreign Aid, Domestic Savings and Economic Growth in Selected MENA Countries

Mahmoud Sabra and Abdel Hakeem Ahmad Eltalla ()

Business and Economic Research, 2016, vol. 6, issue 1, 352-362

Abstract: 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.

Keywords: Foreign Aid; Domestic Savings; Economic Growth; Panel Data Models; MENA countries. (search for similar items in EconPapers)
JEL-codes: C23 C33 E21 F35 F43 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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