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How defensive were lending and aid to HIPC?

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  • Silvia Marchesi

    ()
    (Department of Economics, University of Milan-Bicocca)

  • Alessandro Missale

    (Dipartimento di Scienze Economiche, Aziendali e Statistiche Università di Milano)

Abstract

We examine both grants and net loans made to low income countries during the last two decades to understand the main reasons that motivated the behaviour of both donors and creditors. Our results point to an overall "mixed" evidence, concerning the hypotheses of defensive lending (and defensive granting). Specifically, while a higher level of multilateral debt negatively affects both multilateral new loans and grants to low-income countries, in the case of HIPC such "correction" does not take place at all (in the case of grants) or it is much weaker (in the case of net loans). Bilateral creditors reduce their loans as their debt exposure increases and significantly so in the case of HIPC, while bilateral donors give more grants to HIPC as their bilateral debt share increases.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper115.pdf
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 115.

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Length: 32 pages
Date of creation: 2007
Date of revision: 2007
Handle: RePEc:mib:wpaper:115

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Keywords: Debt relief; foreign aid; highly indebted poor countries;

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  1. Alesina, Alberto & Weder, Beatrice, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," Scholarly Articles 4553011, Harvard University Department of Economics.
  2. Baltagi, Badi H. & Li, Qi, 1995. "Testing AR(1) against MA(1) disturbances in an error component model," Journal of Econometrics, Elsevier, vol. 68(1), pages 133-151, July.
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  7. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, December.
  8. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2003. "Policy Selectivity Forgone: Debt and Donor Behavior in Africa," World Bank Economic Review, World Bank Group, vol. 17(3), pages 409-435, December.
  9. Easterly, William, 1999. "How did highly indebted poor countries become highly indebted? : reviewing two decades of debt relief," Policy Research Working Paper Series 2225, The World Bank.
  10. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
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  12. Henry, Peter B. & Arslanalp, Serkan, 2003. "Helping the Poor to Help Themselves: Debt Relief or Aid?," Research Papers 1838, Stanford University, Graduate School of Business.
  13. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  14. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  15. Renard, Robrecht & Cassimon, Danny, 2001. "On the Pitfalls of Measuring Aid," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  16. Tito Cordella & Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 03/88, International Monetary Fund.
  17. Serkan Arslanalp & Peter Blair Henry, 2005. "Is Debt Relief Efficient?," Journal of Finance, American Finance Association, vol. 60(2), pages 1017-1051, 04.
  18. Nancy Birdsall & John Williamson, 2002. "Delivering on Debt Relief: From IMF Gold to a New Aid Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 337.
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Cited by:
  1. Silvia Marchesi & Emanuela Sirtori, 2011. "Is two better than one? The effects of IMF and World Bank interaction on growth," The Review of International Organizations, Springer, vol. 6(3), pages 287-306, September.
  2. Bjerg, Christina & Bjørnskov, Christian & Holm, Anne, 2011. "Growth, debt burdens and alleviating effects of foreign aid in least developed countries," European Journal of Political Economy, Elsevier, vol. 27(1), pages 143-153, March.
  3. Johansson, Pernilla, 2009. "Grants to needy countries? A study of aid composition between 1975 and 2005," Working Papers 2009:19, Lund University, Department of Economics.

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