Abstract

The political regimes in Afghanistan have changed frequently, which makes it impossible to implement a specific pattern of economic growth policy. As a result, the economy has fluctuated significantly over the past more decades, and similar scenarios have continued repeatedly, it becomes important to analyze the economic growth through Total Factor productivity (TFP) determinants by using the Ordinary Least Squares (OLS) method for measuring the effect of determinants of Total Factor productivity such as education, health, capital, trade openness, government expenditure, and foreign aid on economic growth, and the Engle-Granger cointegration test for establishing long-term relationship between the selected variables. This study analyzes 44 years from 1970 to 2020 (excluding the period 1994-2000), obtained from the UN database and World Development Indicators (WDI).

All variables stationary at I(1) were confirmed by the Augmented Dicky-Fuller (ADF) test. Dummy variables are introduced to assess the effect of political regime changes post-2002 on economic growth. Before 2002 the result showed a positive and significant relationship between Real GDP and capital although foreign aid and government expenditure were negative and significant also health, represented by the infant mortality rate, indicated a positive and significant effect, opposing economic theory. Education and trade openness found an insignificant association. After 2002 the results found insignificant relationships between real GDP and all independent variables without Foreign aid and government expenditure. The Engle-Granger cointegration test has confirmed the long-term relationship between variables. The findings emphasize that capital, government expenditure, and foreign aid can contribute to sustained economic development.