Foreign Aid, Exports and Development in Euromed
AbstractThis paper investigates the link between foreign aid and exports between the two shores of the Mediterranean. The main hypothesis is that the Euro-Mediterranean Process should promote not only trade but also stronger links between the European Union (EU) and the Middle East and North Africa (MENA). Hence, we expect development aid to have a positive impact on exports, which could also intensify the aid-trade relationship. In particular, we expect to find higher trade volumes in both directions after the process started in 1995 and intensified in the late 1990s and early 2000s, when several bilateral free trade agreements were signed. A gravity model augmented with bilateral and multilateral aid and trade regime variables is estimated for exports and imports from recipient countries to donor countries for the period 1988 to 2007 using advanced panel data techniques. Our method addresses the endogeneity bias of the trade regime/economic integration agreement (EIA) variable, assuming that decisions to form or enlarge EIAs are slow-moving relative to trade flows.
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Bibliographic InfoPaper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 218.
Length: 38 pages
Date of creation: 08 May 2012
Date of revision:
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International Trade; Foreign Aid; Euro-mediterranean Process;
Other versions of this item:
- F10 - International Economics - - Trade - - - General
- F35 - International Economics - - International Finance - - - Foreign Aid
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- Cecília Hornok, 2010. "Trade-Enhancing EU Enlargement and the Resurgence of East-East Trade," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 79â94, August.
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- Kemp, Murray C. & Wong, Kar-yiu, 1993. "Paradoxes associated with the administration of foreign aid," Journal of Development Economics, Elsevier, vol. 42(1), pages 197-204, October.
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