Abstract
Is there a link between bilateral aid and trade flows? Official aid policy statements and reports on aid appear to answer in the affirmative. Various references are made to the commercial “return” from aid, directly by promoting donor exporters (especially tied aid which subsidises exports) or indirectly by increasing recipient growth and capacity to purchase exports. References are also made to linking the allocation of aid to donor commercial interests, with emphasis being given to important export markets, both current and potential. Taking the official line at face value, one could therefore be forgiven for assuming that there is indeed a causal bi-directional link between aid and trade flows: aid leads to trade and trade leads to aid. This impression is reinforced by reading much of the independent NGO literature on aid and trade (see Randal and German, 1994). It is often simply taken for granted, even by academic commentators, that such a link exists, yet there has been little research which has sought to empirically validate, in any systematic way, whether a link between aid and trade actually exists.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Andersson, T. and H. HellstrSm (1994), Links between Development Assistance and Donor Country Exports — the case of Sweden, SASDA, Ds 1994:58 Report 1, Stockholm: Ministry for Foreign Affairs.
Granger, C.J. (1969), “Investigating Causal Relationships by Econometric Models and Cross Spectral Methods”, Econometrica, 37, 424–435.
Heller, P. (1975), “A Model of Public Fiscal Behaviour in Developing Countries: Aid, Investment and Taxation”, American Economic Review, 65, 313–327.
International Monetary Fund (IMF) (1974–94), Direction of Trade Statistics Yearbook, International Monetary Fund, Washington.
Jepma, C. (1989), The Tying of Aid, International Foundation for Development Economics, University of Groningen.
Jepma, C. (1991), EC-wide Untying, International Foundation for Development Economics and Department of Economics, University of Groningen.
Maxwell, S. and H. Singer (1977), “Food Aid to Developing Countries: A Survey” World Development, 7:4, 225–247.
McGillivray, M. and E. Oczkowski (1992), “A two-part sample selection model of British bilateral foreign aid allocation”, Applied Economics, 24, 1311–1319.
McGillivray, M. and O. Morrissey (1998), Links between Aid and Trade Flows: A Literature Survey, CREDIT Research Paper, Centre for Research in Economic Development and International Trade, University of Nottingham, Nottingham (forthcoming).
McGillivray, M. and H. White (1993), “Explanatory Studies of Aid Allocation among Developing Countries”, The Hague: ISS Working Paper No. 148.
Morrissey, O. (1991), “An Evaluation of the Economic Effects of the Aid and Trade Provision”, Journal of Development Studies, 28, 104–129.
Morrissey, O. (1993a), “The Mixing of Aid and Trade Policies”, The World Economy, 16:1, 69–84.
Morrissey, O. (1993b), “Donor Trade Benefits from Aid: Evidence from the EC and sub-Saharan Africa”, paper presented to the Aid Policy Working Group: General Sessions, Vllth EADI General Conference, Berlin, 15–18 September 1993.
Morrissey, O. (1995), “Politics and Economic Policy Reform: Trade Liberalisation in Sub-Saharan Africa”, Journal of International Development, 7:4, 599–618.
Morrissey, O., B. Smith and E. Horesh (1992), British Aid and International Trade, Buckingham: Open University Press.
Mosley, P, J. Hudson and S. Horrell (1987), “Aid, the Public Sector and the Market in Less Developed Countries”, Economic Journal, 97, 616–641.
Nilsson, L. (1996), “Aid and Donor Exports: The Case of the EU Countries”, Department of Economics, University of Lund, mimeo.
OECD (1975–94), Geographical Distribution of Financial Flows to Developing Countries, Paris: Organisation for Economic Co-operation and Development.
Randal, J. and T. German (Eds) (1994), The Reality of Aid 94, London: ActionAid
van Wijnbergen, S. (1986), “Macroeconomic Aspects of the Effectiveness of Foreign Aid: The Two Gap Model, Home Goods Disequilibrium and Real Exchange Rate Misalignment”, Journal of International Economics, 21, 123–136.
White, H. (1992), “The Macroeconomic Impact of Development Aid: A Critical Survey”, Journal of Development Studies, 28, 163–240
White, H. and M. McGillivray (1992), “Aid, the Public Sector and Crowding In”, in Two Papers on Aid and Government, ISS Working Paper, No. 126, The Hague.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1999 Springer Science+Business Media New York
About this chapter
Cite this chapter
McGillivray, M., Morrissey, O., Cnossen, T. (1999). Is There a Link Between Aid and Trade Flows? An Econometric Investigation. In: Gupta, K.L. (eds) Foreign Aid: New Perspectives. Recent Economic Thought Series, vol 68. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5095-2_6
Download citation
DOI: https://doi.org/10.1007/978-1-4615-5095-2_6
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-7318-6
Online ISBN: 978-1-4615-5095-2
eBook Packages: Springer Book Archive