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Foreign aid and economic growth: the case of the countries south of the Mediterranean

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  • Rene Teboul
  • Emmanuelle Moustier

Abstract

Mediterranean countries provide a test case for examining the effectiveness of foreign capital in promoting economic growth. Focusing on the supply side of the economy, the econometric model answers two questions, using available panel data from 1960 to 1996: does foreign aid have a positive impact on growth of per capita income? does aid substitute or complete domestic savings? Three significant results are found: aid efficiency is indirect, it is dependent on the way it will be transmitted to other exogenous variables, specially to savings and to FDI and thus, on the efforts of the Mediterranean countries to change in-depth their productive structure; aid must be differentiated, in its contents as well as in its objectives depending on the development model of the beneficiary country; aid must be more regular. Aid allocation south of the Mediterranean is often chaotic and caused by geopolitical logic.

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  • Rene Teboul & Emmanuelle Moustier, 2001. "Foreign aid and economic growth: the case of the countries south of the Mediterranean," Applied Economics Letters, Taylor & Francis Journals, vol. 8(3), pages 187-190.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:3:p:187-190
    DOI: 10.1080/13504850150504577
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    Cited by:

    1. Kanta Marwah & Akbar Tavakoli, 2004. "The Effect of Foreign Capital and Imports on Economic Growth: Further Evidence from Four Asian Countries," Carleton Economic Papers 04-02, Carleton University, Department of Economics.
    2. Mohammad Mafizur Rahman & Muhammad Shahbaz, 2013. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 59-81, March.
    3. Larru, Jose Maria, 2009. "A structural analysis of foreign aid to ten Mediterranean countries," MPRA Paper 17865, University Library of Munich, Germany.
    4. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    5. Muhammad Shahbaz & Mohammad Mafizur Rahman, 2012. "The Dynamic of Financial Development, Imports, Foreign Direct Investment and Economic Growth: Cointegration and Causality Analysis in Pakistan," Global Business Review, International Management Institute, vol. 13(2), pages 201-219, June.
    6. Kamal Upadhyaya & Gyan Pradhan & Dharmendra Dhakal & Rabindra Bhandari, 2007. "Foreign Aid, FDI and Economic Growth in East European Countries," Economics Bulletin, AccessEcon, vol. 6(13), pages 1-9.
    7. repec:ebl:ecbull:v:6:y:2007:i:13:p:1-9 is not listed on IDEAS

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