Foreign Aid and Export Performance: A Panel Data Analysis of Developing Countries

23 Pages Posted: 31 May 2007

See all articles by Jonathan Munemo

Jonathan Munemo

World Bank

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Arabinda Basistha

West Virginia University - College of Business & Economics

Date Written: May 2007

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: Foreign aid, export performance, developing countries

JEL Classification: F35, O24

Suggested Citation

Munemo, Jonathan and Bandyopadhyay, Subhayu and Basistha, Arabinda, Foreign Aid and Export Performance: A Panel Data Analysis of Developing Countries (May 2007). Available at SSRN: https://ssrn.com/abstract=988773 or http://dx.doi.org/10.2139/ssrn.988773

Jonathan Munemo (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Arabinda Basistha

West Virginia University - College of Business & Economics ( email )

Morgantown, WV 26506-6025
United States

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