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Empirical Evidenceon the New International Aid Architecture

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  • Danny Cassimon
  • Stijn Claessens
  • Bjorn Van Campenhout

Abstract

We study how 22 donors allocate their bilateral aid among 147 recipient countries over the 1970- 2004 period to investigate whether changes in the international aid architecture?at the international and country level?have led to changes in behavior. We find that after the fall of the Berlin wall, and especially in the late nineties, bilateral aid responds more to economic need and the quality of a recipient country''s policy and institutional environment and less to debt, size, and colonial linkages. Importantly, we find that when a country uses a PRSP and passes the HIPC decision point the perverse effect of large bilateral and multilateral debt shares on aid flows is reduced, suggesting less defensive lending. Overall, it appears international aid architecture changes have led to more selectivity in aid allocations. The specific factors causing these changes remain unclear, however. Furthermore, there remain large differences among donors in selectivity that appear to relate to donors'' own institutional environments. Together this suggests that further reforms will have to be multifaceted.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/277.

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Length: 53
Date of creation: 01 Dec 2007
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Handle: RePEc:imf:imfwpa:07/277

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Keywords: Debt relief; Heavily indebted poor countries; Poverty Reduction Strategy Papers; debt; bilateral debt; debt reduction; multilateral debt; loans; debt burden; debt stocks; interest; debt forgiveness; creditors; foreign aid; payments; bilateral donors; debt burdens; debt sustainability; debt reductions; bilateral donor; multilateral creditors; debt flows; debt stock; debt restructuring; indebted countries; debt obligations; repayments; actual debt; debtors; bilateral creditors; debt sustainability analysis; sovereign bond; debt level; net debt; allocation criteria; restructuring; principal repayments; external shocks; debt data; external financing; solvency; debts; bilateral loans;

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References

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Citations

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Cited by:
  1. Danny Cassimon & Bjorn Van Campenhout, 2008. "Multiple Equilibria in the Dynamics of Financial Globalization," WEF Working Papers 0044, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  2. Ezequiel Cabezon & Tej Prakash, 2008. "Public Financial Management and Fiscal Outcomes in Sub-Saharan African Heavily-Indebted Poor Countries," IMF Working Papers 08/217, International Monetary Fund.
  3. Belke, Ansgar & Bordon, Ingo & Melnykovska, Inna & Schweickert, Rainer, 2009. "Prospective NATO or EU Membership and Institutional Change in Transition Countries," IZA Discussion Papers 4483, Institute for the Study of Labor (IZA).
  4. Powell, Robert & Bird, Graham, 2010. "Aid and Debt Relief in Africa: Have They Been Substitutes or Complements?," World Development, Elsevier, vol. 38(3), pages 219-227, March.
  5. Yongzheng Yang & Nkunde Mwase, 2012. "BRICs’ Philosophies for Development Financing and their Implications for LICs," IMF Working Papers 12/74, International Monetary Fund.
  6. Thorsten Drautzburg & Andrea Gawrich & Inna Melnykovska, 2008. "Institutional Convergence of CIS Towards European Benchmarks," CASE Network Reports 0082, CASE-Center for Social and Economic Research.
  7. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective Membership and Institutional Change in Transition Countries," Kiel Working Papers 1562, Kiel Institute for the World Economy.
  8. Ralf Hepp, 2005. "Consequences of Debt Relief Initiatives in the 1990s," International Finance 0510004, EconWPA.
  9. World Bank & International Monetary Fund, 2010. "Global Monitoring Report 2010 : The MDGs after the Crisis," World Bank Publications, The World Bank, number 2444, October.
  10. Nkunde Mwase, 2011. "Determinants of Development Financing Flows From Brazil, Russia, India, and China to Low-Income Countries," IMF Working Papers 11/255, International Monetary Fund.
  11. Thorsten Drautzburg & Inna Melnykovska & Rainer Schweickert, 2008. "Which Membership Matters? External vs. Internal Determinants of Institutional Change in Transition Countries," Kiel Working Papers 1421, Kiel Institute for the World Economy.

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