Aid for Trade is more effective when the trading environment is more predictable

Abstract

AbstractAid for Trade (AfT) has been provided as part of the official development aid package to help developing countries better integrate into the global trading system. This article investigates whether AfT flows promote investment‐oriented remittances (IOR) inflows in a more predictable domestic trading environment. AfT interventions drive IOR inflows in countries that implement trade measures of good quality (i.e. those which lower both trade costs and trade costs volatility). These findings underline the role of AfT flows in promoting the development of the private sector in developing countries where the trading environment can be made increasingly predictable.