Does AID for trade promote exports of recipient countries?

Abstract

Although Aid for Trade(AfT) is recognized as a reliable source to increase exports by reducing the cost of trade in developing countries, its effectiveness on exports is not sufficiently proven. This paper analyzes whether AfT is effective in increasing export volumes in Asian recipient countries by using the fixed effect panel model and the data from 2006 to 2015. The result reports that overall AfT would not significant impact exports, but aid disbursed to trade policy and regulations, would positively and meaningfully affect exports. Through further analysis by the income level of countries, the evidence reveals that aid to productive capacity would positively affect export volumes in the relatively lower income group (LICs and LMICs), and that aid to trade policy and regulations would be considerably useful for the export growth in the higher income group (HICs and UMIC). These results demonstrate that the impact of AfT on the export volumes in Asian countries would therefore, vary depending on the kinds of AfT received, and recipient country groups divided by income level.