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.
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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
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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; Longitudinal Data; Spatial Time Series
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F35 - International Economics - - International Finance - - - Foreign Aid
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