Foreign Aid and Growth in Egypt: The Role of Economic Policy

Noha Emara¹, David Plotkin², Alyssa Stein^3
(1. Rutgers University; 2. Columbia University; 3. Barnard College, Columbia University, USA)

Abstract: The relationship between foreign aid and the economic growth of developing countries is unquestionably an intricate one. While a newcomer to the topic might expect to find an obvious effect of aid on growth, the overwhelming majority of the literature in this field does not conclude its studies with such findings. Some research simply argues that aid has a negative relationship on growth, while some holds the claim that a positive relationship is attainable, yet only with sound economic policies and strong institutions in place on the end of the receiving country. Using an Autoregressive Distributed Lag (ARDL) methodology, the study estimates the effectiveness of aid in Egypt over the period from 1960 to 2010. Different components of the existing material on the various and complex aid-policy growth relationships will be brought together and broken down. The study will use these findings to suggest an optimal foreign aid plan of action for Egypt’s economic growth efforts.

Key words: foreign aid; Egypt; policies; institutions; autoregressive distributed lag

JEL codes: F3, C5, E6, O4