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Foreign Aid and Economic Growth in Egypt and Jordan: An Empirical Analysis

  • Bassam Abou al Foul


    (Dept. of Economics, School of Business & Management, American University of Sharjah, UAE)

This paper empirically examines the long-run relationship between per capita real foreign aid and per capita real GDP for Egypt (1960-2005) and Jordan (1965-2005) using a newly developed approach to cointegration by Pesaran et al. (2001) that performs well with small samples and regardless of the orders of the respective time series (it makes no difference whether time series are I (0), I (1), or I (0)/I (1)). The empirical results reveal that in the case of Jordan a long-run relationship exists between the variables, while there is no evidence to support that a long-run relationship exists in the case of Egypt. The Granger causality test supports a long-run causality from foreign aid to GDP in the case of Jordan. However, in the case of Egypt, the results show no support of Granger causality between foreign aid and GDP.

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Paper provided by Economic Research Forum in its series Working Papers with number 418.

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Length: 10 pages
Date of creation: Jul 2008
Date of revision: Jul 2008
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:418
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