Donors’ Trade and Their Supply of Development Aid Related to the Trade Sector: Does Donors’ Output Gap Matter?

This paper complements the literature on the impact of donor-countries’ trade on their supply of Official Development Aid relating to the trade sector (ODATRADE). It investigates whether the impact of donor-countries’ trade balance (including overall trade balance in goods and services, trade balance in goods vis-a-vis developing and developed countries, and trade balance in services) on ODATRADE depends on the level of donor-countries’ output gap. Relying on a sample of 22 donor-countries over the period 1967–2015, the empirical analysis shows that donors’ output gap does matter for the impact of trade balance variables on ODATRADE.