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Aid and Trade Sustainability under Liberalisation in Least Developed Countries
Author(s) -
SantosPaulino Amelia U.
Publication year - 2007
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2007.01040.x
Subject(s) - balance of payments , current account , economics , international economics , liberalization , capital account , balance of trade , sustainability , capital (architecture) , free trade , exchange rate , international trade , monetary economics , market economy , history , archaeology , ecology , biology
This study investigates the effect of trade liberalisation on export growth, import growth, the trade balance and the current account of the balance of payments in 17 Least Developed Countries (LDCs) over the period 1970 to 2001. The paper also assesses the marginal relation between capital flows (e.g. aid flows) and import growth, and the trade balance and the current account of the balance of payments. The higher import growth contrasts with the more modest export growth following trade liberalisation and that has fundamental policy implications, especially for the balance of trade and the balance of payments. However, the financing and sustainability of the trade deficit in the reforming countries will depend not only on the outcome of trade liberalisation, but also on other macroeconomic policies, developments in the real exchange rate and the inflows of foreign capital.