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FOREIGN AID, EXPORTS AND DEVELOPMENT IN EUROMED

Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann D. and Florian Johannsen
Additional contact information
Felicitas Nowak-Lehmann D.: Ibero-America Institute for Economic Research and Center for European, Governance and Economic Development Research, University of Göttingen, Germany
Florian Johannsen: Department of Economics, University of Göttingen, Germany

Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

Middle East Development Journal (MEDJ), 2012, vol. 04, issue 02, 1-24

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.

Keywords: International trade; foreign aid; Euro-Mediterranean process (search for similar items in EconPapers)
Date: 2012
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Working Paper: Foreign Aid, Exports and Development in Euromed (2012) Downloads
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DOI: 10.1142/S1793812012500071

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