Foreign aid provides humanitarian assistance and economic assistance to developing countries. This research paper examines the impact of foreign aid on economic development in. An econometric model is developed to explain the Egypt aggregate output, including total labor force, capital stock, foreign aid, government expenditures and the real exchange rate. Annual time-series data from 1990-2013 are used to estimate the model. Before carrying out the estimation, the time series properties are diagnosed and an error correction model is developed and estimated. Overall results suggest that, in the short run, foreign aid has positively contributed to economic growth. However, the impact of foreign aid in the long run has contributed negatively to economic growth due to different policy implementations of foreign aid. |
