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International Trade Cooperation and Exogenous Economic Shocks in Developing Countries

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  • Sena Kimm Gnangnon

Abstract

This article explores whether the World Trade Organization (WTO), through its role of promoting multilateral trade liberalisation and mobilising greater financial resources (i.e., Aid for Trade [AfT] flows) in favour of the trade sector in developing countries, contributes to reducing the size of external economic shocks experienced by these countries. An empirical analysis is carried out using a sample of 111 countries over the period 1996–2016 and relying on the two-step system generalised method of moments (GMM) approach. The findings indicate that taken separately, multilateral trade liberalisation and AfT flows reduce the size of shocks. While the two factors are substitutable in negatively influencing countries’ size of shocks, it also appears that multilateral trade liberalisation always results in smaller shocks, irrespective of the amount of AfT that accrues to countries. JEL: F13, F14, F32, F35

Suggested Citation

  • Sena Kimm Gnangnon, 2022. "International Trade Cooperation and Exogenous Economic Shocks in Developing Countries," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(2), pages 139-175, December.
    • Handle: RePEc:sae:artjou:v:21:y:2022:i:2:p:139-175
    DOI: 10.1177/0976747920945188
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F35 - International Economics - - International Finance - - - Foreign Aid

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