Therole and effects of foreign aid in the economic development of developingcoun&ies have been controversial issues. Some economic studies of forei51aid suggest that it is successful, as the other studies find no relationshipbetween foreign aid and growth rate of output, and suggest that it also retardseconomic gowth in developing countries by leading to the sfructural distortionsof the economy, This study has examined empirically the effectiveness andimpact of foreigl aid on the economic development of Turkey from 1963 to 1990.A simultaneous equations model was developed and Three Stage Least Squaresmethod was used to assess bothdirect and indirect effects of foreign aid on economic development of Turkey.The empincal results have made an important conuibution to understanding therole of foreigl aid as a determinant of the behaviotr of savings, gowth,invesünent, etc. in the Turkish economy. The basic conclusion in this study isthat aid was successful and made aposifive contribution to the economic development efforts of Turkey over theperiod 1963-1990.