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Foreign Aid, Exports and Development in Euromed

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Abstract

This 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.

Suggested Citation

  • Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Florian Johannsen, 2012. "Foreign Aid, Exports and Development in Euromed," Ibero America Institute for Econ. Research (IAI) Discussion Papers 218, Ibero-America Institute for Economic Research.
    • Handle: RePEc:got:iaidps:218
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    Cited by:

    1. Joko Mariyono, 2012. "Indonesian Textile Exports in the Presence of Bilateral Foreign Aid," Asia Pacific Journal of Public Administration, Taylor & Francis Journals, vol. 34(2), pages 171-186, December.
    2. Inmaculada Martinez-Zarzoso, 2019. "Effects of Foreign Aid on Income through International Trade," Politics and Governance, Cogitatio Press, vol. 7(2), pages 29-52.

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    More about this item

    Keywords

    International Trade; Foreign Aid; Euro-mediterranean Process;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

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