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Conditionality, Commitment and Investment Response in LDCs

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  • Mariarosaria Agostino

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    (Department of Economics and Statistics, University of Calabria, Italy)

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    Abstract

    The 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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    File URL: ftp://ftp.econ.au.dk/afn/wp/04/wp04_10.pdf
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    Bibliographic Info

    Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2004-10.

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    Length: 35
    Date of creation: 19 Oct 2004
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    Handle: RePEc:aah:aarhec:2004-10

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    Web page: http://www.econ.au.dk/afn/

    Related research

    Keywords: Conditional aid; policy uncertainty; investment response; dynamic panel methods.;

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