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Aid and Trade Sustainability under Liberalisation in Least Developed Countries

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  • Amelia U. Santos‐Paulino

Abstract

This study investigates the effect of trade liberalisation on export growth, import growth, the trade balance and the current account of the balance of payments in 17 Least Developed Countries (LDCs) over the period 1970 to 2001. The paper also assesses the marginal relation between capital flows (e.g. aid flows) and import growth, and the trade balance and the current account of the balance of payments. The higher import growth contrasts with the more modest export growth following trade liberalisation and that has fundamental policy implications, especially for the balance of trade and the balance of payments. However, the financing and sustainability of the trade deficit in the reforming countries will depend not only on the outcome of trade liberalisation, but also on other macroeconomic policies, developments in the real exchange rate and the inflows of foreign capital.

Suggested Citation

  • Amelia U. Santos‐Paulino, 2007. "Aid and Trade Sustainability under Liberalisation in Least Developed Countries," The World Economy, Wiley Blackwell, vol. 30(6), pages 972-998, June.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:6:p:972-998
    DOI: 10.1111/j.1467-9701.2007.01040.x
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    References listed on IDEAS

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    1. Amelia U. Santos-Paulino, 2007. "Trade Sustainability and Aid under Liberalization in Fragile Least Developed Countries," WIDER Working Paper Series RP2007-26, World Institute for Development Economic Research (UNU-WIDER).
    2. David R. Dollar & Shantayanan Devarajan & Torgny Holmgren, 2001. "Aid and Reform in Africa : Lessons from Ten Case Studies," World Bank Publications - Books, The World Bank Group, number 13894, April.
    3. World Bank, 2002. "World Development Indicators 2002," World Bank Publications - Books, The World Bank Group, number 13921, April.
    4. Dean, J.M. & Desai, S. & Riedel, J., 1994. "Trade Policy Reform in Developing Countries since 1985," World Bank - Discussion Papers 267, World Bank.
    5. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
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    Cited by:

    1. Rekiso, Zinabu Samaro, 2020. "Trade deficits as development deficits: Case of Ethiopia," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 344-353.
    2. Pacheco-López, Penélope & Thirlwall, Anthony, 2009. "Has Trade Liberalisation in Poor Countries Delivered the Promises Ecpected?," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(08), pages 7-34, primer se.
    3. Kurtovic, Safet & Halili, Blerim & Maxhuni, Nehat, 2016. "Liberalization of Trade with Leading Trade Partners: Some Evidence from Bosnia and Herzegovina," MPRA Paper 75053, University Library of Munich, Germany, revised 04 Nov 2016.
    4. Constantine, Collin, 2014. "Rethinking the Twin Deficits," MPRA Paper 58798, University Library of Munich, Germany.
    5. Sèna Kimm Gnangnon, 2019. "Aid for Trade and Recipient Countries’ Export Structure: Does Trade Policy Liberalisation Matter?," Arthaniti: Journal of Economic Theory and Practice, , vol. 18(1), pages 56-85, June.
    6. Hadili, Abduraawf & Raab, Roman & Wenzelburger, Jan, 2016. "Trade Liberalization in Arab Maghreb Union Countries," MPRA Paper 71123, University Library of Munich, Germany.
    7. A. P. Thirlwall, 2013. "Economic Growth in an Open Developing Economy," Books, Edward Elgar Publishing, number 15208, June.
    8. Ali Dadpay & Saleh S. Tabrizy, 2021. "Political Agreements and Exporting Activities: An Empirical Assessment of the Effects of the JCPOA Agreement on Iran’s Exports," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 147-180, March.
    9. Gnangnon, Sèna Kimm & Iyer, Harish, 2021. "Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences offered by the QUAD countries," EconStor Preprints 238211, ZBW - Leibniz Information Centre for Economics.

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