Abstract

This paper examines the growing gap between the theoretical and empirical growth literature and policy needs of the developing economies. Growth literature has focused mainly on long term growth outcomes, but policy makers of the developing economies need rapid improvements in the short to medium term growth rates. In this paper we argue that this gap can be reduced by distinguishing between the short to medium term dynamic effects of policies from their long run equilibrium effects. With data from selected 15 MENA countries; we show that an extended version of the Solow (1956) model is well suited for this purpose. We include the education find that the short to medium term growth effects of the investment ratio are quite significant and they may persist for up to 10 years.

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