How defensive were lending and aid to HIPC?
AbstractWe investigate whether defensive lending and defensive granting motivated the transfer of resources by official donors to low income countries. We estimate a dynamic panel of 75 low-income IDA and IDA-Blend countries for the period 1982 to 2008, where the sample includes 41 HIPC and a control group of other 34 low- income countries. Our results point to no evidence of defensive lending as opposed to strong evidence of defensive granting. Both bilateral and multilateral donors reduce their loans as the debt they hold increases (where such “correction” is actually weaker in the case of multilateral loans to HIPC). Official donors provide more grants as multilateral debt increases where this effect is significant only for debt- ridden HIPC countries. This result is consistent with a substitution of grants for loans and the new approach to debt sustainability, but questions the efficiency and selectivity of the aid policy.
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Bibliographic InfoPaper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 220.
Length: 40 pages
Date of creation: Feb 2012
Date of revision: Feb 2012
debt relief; foreign aid; highly indebted poor countries.;
Other versions of this item:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F35 - International Economics - - International Finance - - - Foreign Aid
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-27 (All new papers)
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