Conditionality, Commitment and Investment Response in LDCs
AbstractThe private investment response to structural reforms in developing countries is of paramount importance, both for the future economic growth and the survival of the reforms themselves. By employing a sample of countries, recipients of World Bank Structural Adjustment Loans, the present paper assesses whether agreements, including policy conditionality, represent a positive signal for the private sector and translate into capital formation. The empirical investment equation adopted is estimated using dynamic panel data econometric methods, allowing for simultaneity and country-specific effects. The main result obtained is that, while a higher propensity to commit does not seem to affect the private investment response, a higher percentage of tied funds might impact negatively on the demand of fixed investment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2004-10.
Date of creation: 19 Oct 2004
Date of revision:
Contact details of provider:
Web page: http://www.econ.au.dk/afn/
Conditional aid; policy uncertainty; investment response; dynamic panel methods.;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F35 - International Economics - - International Finance - - - Foreign Aid
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
- Pindyck, Robert S. & Solimano, Andrés., 1993.
"Economic instability and aggregate investment,"
3552-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S. & Solimano, Andres, 1993. "Economic instability and aggregate investment," Policy Research Working Paper Series 1148, The World Bank.
- Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Ferderer, J. Peter & Zalewski, David A., 1994. "Uncertainty as a Propagating Force in The Great Depression," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 825-849, December.
- Ratha, Dilip, 2001.
"Demand for World Bank lending,"
Policy Research Working Paper Series
2652, The World Bank.
- Rodney Ramcharan, 2002. "How Does Conditional Aid (Not) Work?," IMF Working Papers 02/183, International Monetary Fund.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Fleck, Robert K. & Kilby, Christopher & Fleck, Robert K., 2001.
"World Bank Independence: A Model and Statistical Analysis of U.S. Influence,"
Vassar College Department of Economics Working Paper Series
53, Vassar College Department of Economics.
- Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, 05.
- Boko, Sylvain H & Lapan, Harvey E, 2001.
"Pre-commitment Mechanism and Policy Credibility in African Trade Reform,"
Review of Development Economics,
Wiley Blackwell, vol. 5(1), pages 25-39, February.
- Boko, Sylvain & Lapan, Harvey E., 2001. "Pre-Commitment Mechanism and Policy Credibility in African Trade Reform," Staff General Research Papers 5245, Iowa State University, Department of Economics.
- Rama, Martin, 1990. "Empirical investment equations in developing countries," Policy Research Working Paper Series 563, The World Bank.
- Simmons, Beth A., 2000. "The Legalization of International Monetary Affairs," International Organization, Cambridge University Press, vol. 54(03), pages 573-602, June.
- Joseph G. Altonji & Lewis M. Segal, 1994.
"Small sample bias in GMM estimation of covariance structures,"
Working Paper Series, Macroeconomic Issues
94-8, Federal Reserve Bank of Chicago.
- Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-66, July.
- Joseph G. Altonji & Lewis M. Segal, 1994. "Small Sample Bias in GMM Estimation of Covariance Structures," NBER Technical Working Papers 0156, National Bureau of Economic Research, Inc.
- Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
- Robert J Barro & Jong-Wha Lee, 2003.
"IMF Programs: Who Is Chosen and What Are the Effects?,"
Departmental Working Papers
2003-09, The Australian National University, Arndt-Corden Department of Economics.
- Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1245-1269, October.
- Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
- Meng, Chun-Lo & Schmidt, Peter, 1985. "On the Cost of Partial Observability in the Bivariate Probit Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 71-85, February.
- Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
- Ferderer, J Peter, 1993. "The Impact of Uncertainty on Aggregate Investment Spending: An Empirical Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 30-48, February.
- Mohsin S. Khan & Sunil Sharma, 2001. "IMF Conditionality and Country Ownership of Programs," IMF Working Papers 01/142, International Monetary Fund.
- Knight, Malcolm & Santaella, Julio A., 1997. "Economic determinants of IMF financial arrangements," Journal of Development Economics, Elsevier, vol. 54(2), pages 405-436, December.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- James M. Boughton & Alex Mourmouras, 2002. "Is Policy Ownership An Operational Concept?," IMF Working Papers 02/72, International Monetary Fund.
- Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September.
- Joshua Aizenman & Nancy P. Marion, 1996. "Volatility and the Investment Response," NBER Working Papers 5841, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.