Aid for Trade and Export Performance of Developing Countries

Abstract

Developing countries face a compliance gap with regard to trading rules at multilateral and bilateral negotiations and despite greater trade openness and the increasingly interdependence nature of global economy, these countries face internal constraints perpetuated by limited resources required to invest in the elements that would boost exports. This study examines the impact of Aid-for-Trade (AfT) on export performance of developing countries using panel data consisting of 131 countries from 2000 to 2013. In order to reveal the impact of AfT on export performance, the study uses regression analysis where the model specification includes variables such as Gross Domestic Product (GDP), money supply, exchange rate, trade openness, transparency and corruption and regulatory environment which are important in trade and have been used in regressions to explore the impact of aid on exports of receiving countries. The study reveals surprising results of the impact of AfT on export performance. Empirical results demonstrate that the impact of AfT on export performance is insignificant despite having a positive coefficient.

Keywords: Aid for Trade, Exports, developing countries.