In this study we compare the impacts of official finance coming from the largest donors of African countries on bilateral trade flows between the donor and the recipient. Applying a gravity model approach, we distinguish between development finance and other official flows. We find that official finance from all the donors stimulates export of goods to Africa, while trade flows in the opposite direction are fostered in the case of China and Europe, but not for the US. Despite some claims in the literature that aid from China aims at securing import of natural resources, we find evidence that countries receiving Chinese aid raise their bilateral export of manufactured goods and not of primary commodities. Finally, while for Europe and the US official flows other than development assistance play a bigger role in shaping trade flows, China primarily uses highly concessional and development oriented flows.
- Aid-trade relation
- Gravity model
- Official development assistance
- Other official flows