The Role of Foreign Aid in Achieving Sustainability of the Different Industrial Sectors in Palestine

The purpose of this paper is to examine the role of foreign aid in achieving sustainability in the different industrial sectors of the Palestinian economy. The Palestinian industrial sector was divided into 15 sectors, and an analysis was conducted to evaluate the effect of foreign aid on them. The data was collected from the Palestinian Central Bureau of Statistics and the Palestine Monetary Authority from 1996 to 2014. The unit root test was performed for each of the 17 variables. Then a cointegration test was performed for each of the 15 industrial sector with both the foreign aid for developing and supporting the Palestinian Authority’s (PA) budget. After completing these tests, a Granger Causality Test and Fully Modified Least Squares (FM-OLS) regression method were performed for the cointegrated industries. The analysis showed that the foreign aid for development had a negative impact on four of the industrial sectors, but with a positive impact for supporting the PA’s budget on two of the industrial sectors.