Page 514 - 2016 - Vol. 40

1- INTRODUCTION

1.1 General Introduction:

For well over decades ago, there has been a
controversy over the relative impact of monetary and fiscal
policies on economic performance as measured by Gross
National Product (GNP) or Gross Domestic Product (GDP).
So far, since the sixties and seventies, there has been
considerable debate with respect to such issues. The
monetarists took the position that monetary policy was
more important than fiscal policy in some economies while
Keynesians hold the view that fiscal policy was more
effective and essential. Dynamic gains from openness may
be much larger; but identifying and measuring them
obviously requires an alternative theoretical approach.

The renewed interest in growth theory, mainly
initiated by the seminal work of Romer (1986), seems to
provide such an approach. Endogenous growth models
allow for direct and persistent link between openness and
growth rate, which is missing in the traditional neoclassical
growth model (Solow, 1956).

It is widely recognized that public expenditure on
infrastructure, such as roads, ports, or communication

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