Foreign aid and export performance: a panel data analysis of developing countries

Subhayu Bandyopadhyay, Arabinda Basistha (arbasistha@mail.wvu.edu) and Jonathan Munemo (jxmunemo@salisbury.edu)

No 2007-023, Working Papers from Federal Reserve Bank of St. Louis

Abstract: The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.

Keywords: Developing countries - Economic conditions; Exports (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-dev, nep-eff and nep-int
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Citations: View citations in EconPapers (19)

Published in Theory and Practice of Foreign Aid, Sajal Lahiri editor, Elsevier, 2007, pp. 421-33

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