Effectiveness of Aid for Trade (AfT): Evidence from Bangladesh

A. F. M. Ataur Rahman and Chowdhury Nawsheen Farooqui

Non-emergency foreign aid can flow for any reason (starting from addressing humanitarian need to seeking political support of the recipient country) however; economically it makes more sense if it flows for trade, which can make a country strong economically. Bangladesh being one of the countries with low per capita GDP is trying hard to increase its output and in that process trade can be quite helpful. In fact, in last two decades the country has registered a huge increase in GDP per capita led by export (of both goods and services). This current paper using data between 2003 and 2013 tries to explore the role of foreign aid in developing trade capacity for Bangladesh. Based on the model proposed by Cali and Te Velde (2011) we found that AfT has a positive impact on export of Bangladesh. All three sub types of trade aid namely, AfT for trade policy and regulations, aid for improving economic infrastructure and aid for building productive capacity affect growth of export positively.

Field of Research: Trade and growth

DOI : http://dx.doi.org/10.21102/graf.2016.03.71.02