Nexus Between Macroeconomic Factors and Economic Growth in Palestine: An Autoregressive Distributed Lag Approach

All the countries are trying their best to achieve maximum economic prosperity through employing ecient economic strategies. Such countries seem to be conscious of various factors that can potentially affect economic growth. Given that, the current study examines the impact of various macroeconomic factors on the economic growth of Palestine. By employing the large range of quarterly data spanning from 2001 to 2020, the statistical outputs of the ARDL model show that government debt, donations, government expenditures, and unemployment rate adversely impact economic growth. However, other factors including credit facilities, ination, and total investments positively impinge upon the economic growth of Palestine. Such dynamic impact of various macroeconomic factors displays the detrimental and growth promising role of macroeconomic factors in determining economic prosperity. Our analysis suggests various policy implications to economic policy ocials regarding the effectiveness of various factors for economic health. It is further recommended to international agencies working in aid and donations intensive countries to design ecient economic policies that can help such economic in coming out from economic distress.


Introduction
It is an immense need of the current age to sustain the economic growth in order to ensure the better living standard for residents of the country (Dauda, 2017). For this purpose, the policy o cials make some strategies and focus on other economic indicators including trade, investment, borrowings, and in ation, etc., to escalates the economic growth. In this regard, a large number of studies explore different factors affecting economic growth ( Given that, the current study seeks to discover the impact of multiple macroeconomic factors on the economic health of Palestine. This study comprehensively considers the various factors as indicated by previous studies and checks their association in relationship with economic growth of Palestine. Additionally, the current study combines the different strands of literature and present their relationship in a single analysis.
Among the others, some key factors that adhered to economic growth and dominantly determine economic health are debt volume, government expenditures, and government investment, etc., as suggested by prior studies.
From a growth perspective, the volume of debt acquired by a country may impede or increase economic growth. In this regard, an empirical study conducted by Spilioti and Vamvoukas (2015) has vowed the positive effect of debt volume on the economic growth of Greek, implying the growth promising role of debt that can be used in renovation or expansion of different development projects. Some other empirical studies have also supported this notion in alternative data speci cations (Bal & Rath, 2014;Ndoricimpa, 2020;Makhoba, et al., 2021). However, some studies have posited the adverse association of debt level with economic status (Daud & Podivinsky, 2014;Kharusi & Ada, 2018;Asteriou, et al., 2021), suggesting the hampering role of debt in determining economic growth. Such inconclusive outcomes of literature argue to further arrange the more empirical studies that specify the dynamic in uence of macroeconomic factors on the economic growth of a country.
The current empirical analysis tends to nd out the dynamic impact of various macroeconomic factors on the growth of real GDP of Palestine. In the current analysis, the volume of GDP is a dependent variable while government debt, total investment, government expenditures, and donations, etc., serve as explanatory variables. For regression analysis, we employ the quarterly data ranging from 2001Q1 to 2020Q4 and apply the Autoregressive Distributed Lag (ARDL) model to quanti es the regression. The statistical ndings imply that government debt, donations, government expenditures, and the unemployment rate have a negative impact whilst credit facilities, in ation, and total investment positively and signi cantly in uence the economic growth of Palestine. Such dynamic impact of various macroeconomic factors depicts that government debt enhances the burden of interest payments and negatively impinges upon the real GDP. Similarly, the receipt of donations may hamper the economic health by in uencing the institutional e ciency and worsening the e ciency of policy o cials due to more dependence on donations. The government expenditures lead to deteriorating the real GDP for unmatured economy owing to fewer amount of funds to cover such expenditures and improper management of funds due to high corruption rate. The negative in uence of unemployment can be de ned as high unemployment led to low per capita income and thus fewer economic activities.
In contrast, the positive association of credit facilities with real GDP shows the favorable impact of private funds on the exploration of economic activities that further results in positive economic status. Similarly, the positive correlation of the in ation rate with economic growth suggests that the in ation rate may lead to more economic progress as it encourages the producers on voluminous production due to the price appreciation phenomenon. Lastly, the positive interaction of total investment with economic growth exempli es the signi cance of government spending in expediating the attached economic activities. The ndings of the study add new thoughts regarding the dynamic impact of various economic factors on the real GDP of Palestine. Our analysis provides robustness to empirical ndings of existing empirical studies arranged on other economies of the world and suggests focusing on these factors to achieve the objective of better economic status in Palestine. The policy o cials should pay more attention to such factors that appeared as hampering the economic growth and should develop some policy modi cations to treat such factors. They should further escalate the other factors e.g., private credit facilities, and more investment to sustain the economic growth.
The other parts of the paper address the following sections: Section 2 illustrates the review of previous studies, section 3 describes the material and methods, and section 4 presents the main empirical analysis and section 5 contains the explanation of these results. Lastly, section 6 provides the conclusion and suggests some policy implications. The bibliographical detail of references used in the body of paper has provided at the bottom of paper.

Literature Review
Economic growth is a multifaceted factor that effecting from other factors including external borrowings, total investment, government spending, donations, and in ation rate, etc. In this regard, a number of studies emerged in the literature that tends to explain the impact of such factors on real GDP, commonly known as economic growth. For instance, Kharusi and Ada, (2018) examined the correlation between external borrowings and the economic growth of Oman. They have found a negative relationship, implying that an increase in external debt can enhance the burden of interest payments which further hampers the economic growth. Supporting this, another study conducted by Abdelaziz, et al., (2019) has speci ed the channel through which external debt deteriorated the economic growth. They have suggested that a higher volume of external debt impedes investment due to costly nancing and hence leads to negative economic growth. Similarly, Razzaque, et al., (2017) have documented the association between exchange rate volatility and economic growth. The empirical analysis of their study indicated that a 10% decline in the exchange rate may lead to a 3.2% increase in real output, indicating the favorable impact of a lower rate of exchange on economic expansion. The ndings of their study appeal for re-considering the exchange rate policy for Bangladesh to achieve the objective of high economic development. Similar effects were also found by another study arranged by Habib, et al., (2017) on some developing economies. An appreciation in the rate of currency exchange (depreciation in the exchange rate) signi cantly reduced the real GDP (enhance the real GDP).
The receipt of donations is another factor that can affect the situation of economic prosperity. This effect is more obvious in poor countries or countries bearing the economic status of under-developed or aid intensive (Bayinah, 2017). Donations are made in various forms including gifts, monetary help, or other consumable goods that may enhance human well beings in speci c regions (Cappellari, et al., 2011). In Islamic states, mostly donations are made in the form of Zakat. Some studies have attempted to nd its association with economic growth. They have suggested that economic growth was driven by physical investment in capital accumulation by the government. Nguyen and Trinh (2018) have also supported the similar effects for Vietnam and vowed that both public and private investments have positive effects on both short-term and long-term economic growth.
Irrespectively, literature has illustrated the detrimental outcomes of unemployment for economic development.
Ahuja and Pandit, (2020) have con rmed the negative effect of unemployment on economic expansion in 59 economies from different area of the globe. However, Sadiku, et al., (2015) found robust evidence on the insigni cant effect of unemployment on economic growth. Pasara and Garidzirai, (2020) have also suggested the insigni cant effect of unemployment on economic progress in the short run. Brie y, the literature argued the dynamic impact of various macroeconomic factors on economic growth for different countries of the globe. In the current analysis, we will test such literature ndings for the Palestine case. Additionally, the inconclusive ndings of previous studies further urge to arrange more empirical studies on this theme.

Path Analyses
The review of empirical ndings of previous studies suggests the following relationship.

Data
The statistical information of under-analysis variables was collected from Palestinian Monetary Authority Online and the Palestinian Central Bureau of Statistics. In this study, we have used the quarterly data ranging from initial quarter (Q1) of 2001 to last quarter (Q4) of 2020. The quarterly data provide more comprehensive views about economic strategies and their accumulative effects on overall economic health. To better exempli es the bond between explained and explanatory variables, the following econometric equation was developed.
GDP t = β ∘ + α 1 GD t + α 2 TI t + α 3 GE t + γ 1 DNS t + γ 2 CPI t + γ 3 EXG t + γ 4 UNP t + γ 5 CRF t + ϵ t eq. (1) In equation (1), the GDP is for gross domestic product that shows the total value of all items generated from all resources within an economy during a speci c period. The GD is an acronym of government debt, illustrating the  The ARDL co-integration strategy will be used if the variables are discovered to be in the order of I (0) or I (1).

Variables
There are three essential steps to it: The rst stage is to establish the long-run link between the variables by using an error correcting method regression to test for the signi cance of lagged variables. The error correction mechanism equation will then be created by adding the initial lag of each variable to the equation. An F-test on the signi cance of all the lagged variables is used to perform a variable addition test. The second step entailed calculating the ARDL form of the equation where the optimal lag length will be determined according to standard criteria such as the Akaike Information or Schwartz Bayesian (Sekaran, 1992). The nal step is to calculate the error correction equation utilizing the variables' differences and the lagged long-run solution, as well as the rate of return to equilibrium adjustment.

Regression Analysis
The results of the Augmented Dicky Fuller test have presented in Table 5, con rming that all considered variables of study are integrated at order zero or one. As a result, the ARDL Bound test is used here, with no variable integrated at order 2, which complicates F-statistics. Note: "The asterisks **and * showed that the coe cient is signi cantly different from zero at 1% and 5% probability, respectively." Source: self-estimation.
The initial stage in ARDL is to establish lag length criteria, and the shortest lags are ideal for time series analysis in order to prevent losing a degree of freedom. The parameters for selecting the lag order are listed in Table 6.  Table 7 illustrates that the ARDL model's calculated value is 6.027, which is over the upper bound critical threshold. Thus, rejecting the null hypothesis shows a long-term association.    The probability values in Table 8

Discussion
The objective of the current study is to assess the in uence of various macroeconomic factors on the economic This positive effect can also be comprehended as the high in ation may lead to encourage the industrial sector through future price appreciation and thus can enhance domestic production (Farooq, et al., 2021). Additionally, the investment shifts the overall production system of an economy upward.
Lastly, the current analysis shows that unemployment is negatively linked with economic growth. Both factors simultaneously affect each other i.e., some studies argue the effect of economic growth on unemployment

Conclusion And Strategy Suggestions
This study tends to explain the liaison between economic growth and other macroeconomic factors including government debt, donations, exchange rate, in ation, credit facilities, investment, and unemployment rate. From a literature perspective, the relationship between economic development and other factors has been discussed widely since from 19th century as each country is trying its best to make itself more prosperous. Given that, the current study aims to explore the dynamic impact of various factors on the economic health of Palestine. To Business and Management. He is also working as an active reviewer in a number of peer-reviewed journals. His main research interest includes corporate nance, energy nance, nancial economics, and macro-economics.
Samir K. Sa : not applicable Muhammad Nouman Sha q: not applicable

Con icting Interests
All the authors declare that we have no potential con icts regarding the conduct of research that may interrupt publication process.

Funding
We have received no funding or any other nancial support for the conduct of research.
Author's contribution Professor Mosab I. Tabash supervised this research, and helps in drafting, funding acquisition, and methodology.
Mr. Umar Farooq has participated as conceptualization, data curation, writing and preparation of original draft while Samir K. Sa has contributed to conceptualization and writing-up. His contribution is also in methodology and implications. Similarly, Muhammad Nouman Sha q has performed data curation, helping in revision of nal draft and preparation.