Aid for Trade Flows and Real Exchange Rate Volatility in Recipient-Countries

Sena Kimm Gnangnon ()
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Sena Kimm Gnangnon: Department of Development Division, World Trade Organization, Rue de Lausanne 154, Geneva 21, CH-1211, Switzerland

Journal of International Commerce, Economics and Policy (JICEP), 2022, vol. 13, issue 01, 1-40

Abstract: This paper aims to contribute to the literature on the determinants of real exchange rate volatility by investigating the effect of Aid for Trade (AfT) flows on real exchange rate volatility in recipient-countries. The empirical findings show that over the full sample, AfT flows influence negatively the volatility of real exchange rate, with a lower reducing effect on Least developed countries (LDCs) compared to NonLDCs. The channels through which this effect materializes include export product concentration, institutional and governance quality, foreign direct investment inflows and terms of trade volatility. These results show that AfT flows clearly matter for real exchange rate volatility.

Keywords: Aid for trade; real exchange rate volatility; export product diversification; institutional and governance quality; foreign direct investment inflows; terms of trade volatility (search for similar items in EconPapers)
JEL-codes: E31 F14 F35 F40 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S1793993322500016

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