DOES FOREIGN AID PROMOTE TRADE?EVIDENCE FROM SOME SELECTED AFRICANCOUNTRIES

Abstract

Will aid given to specific sector promote growth? Will bilateral aid 
be more effective than multilateral aid in export promotion? This paper fills a
gap in the literature by studying the implications of aid channeled
specifically to trade and export oriented growth. Many African Countries 
look towards increase in trade driven growth as a means of improving living 
standards and boosting growth of their economies. Aid given to trade in
desperately poor countries can be of tremendous advantage to such countries.
We investigate some peculiar components of temporal self limiting aid (often 
referred to as development assistance) to sectors that can affect trade in
developing countries. Aid to four sectors was found to have significant
impact on trade although the presence of natural resources tends to reduce
the effectiveness of aid in promoting trade. Institutions and government
economic policies were also found to be weak in the African countries in our
sample reducing aid overall effect on trade.