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Development Impacts of Foreign Aid on Economic Growth, Domestic Savings and Dutch Disease Presence in Palestine

Author

Listed:
  • Mahmoud M. Sabra

    (Faculty of Economics and Administrative Sciences, Al Azhar University Gaza, Palestine.)

  • Shaker Sartawi

    (Palestinian Monetary Authority, Palestine.)

Abstract

Purpose: This work evaluates impact of foreign aid in Palestine. We review the theoretical literature that shows controversial aid impact on macroeconomic variables that could be positive or negative. Our main interest is to estimate the impact of aid on each domestic savings and economic growth, and whether Dutch disease stands or not. Methodology: We run two models, the first is single equation measures the impact on economic growth using OLS technique, the second is two simultaneous equations measure the impact on both domestic savings and economic growth simultaneously using 2SLS technique. Findings: We find that aid crowds out the domestic savings and impacts negatively on economic growth, which detect the Dutch disease presence. Recommendations: We recommend to carry out policy structure to enhance domestic saving, directing aid to investment and productive sectors, improve policy environment and attract more FDI.

Suggested Citation

  • Mahmoud M. Sabra & Shaker Sartawi, 2015. "Development Impacts of Foreign Aid on Economic Growth, Domestic Savings and Dutch Disease Presence in Palestine," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(11), pages 532-542, November.
    • Handle: RePEc:ijr:journl:v:3:y:2015:i:11:p:532-542
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    References listed on IDEAS

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    Cited by:

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    3. Mahmoud M. SABRA, 2022. "How does Israel share Palestinians their international aid," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(630), S), pages 173-186, Spring.

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    More about this item

    Keywords

    Foreign aid; Domestic savings; Economic growth; Dutch disease;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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