Does IDA engage in defensive lending ?
AbstractMultilateral development banks are frequently accused of"defensive lending,"the practice of extending new loans purely in order to ensure that existing loans are repaid. This paper empirically examine this hypothesis using data on lending by and repayments to the International Development Association (IDA), which is the largest provider of concessional development loans to low-income countries. The authors argue that key institutional features of IDA both (i) potentially create incentives for defensive lending, and (ii) enable particularly sharp tests of the defensive lending hypothesis. The authors find that there is a surprisingly robust partial correlation between disbursements on new IDA loans and repayments on existing loans. However, a closer look at the evidence suggests that defensive lending is unlikely to be a major explanation for this partial correlation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4328.
Date of creation: 01 Aug 2007
Date of revision:
Debt Markets; Bankruptcy and Resolution of Financial Distress; Access to Finance; Banks&Banking Reform; Economic Theory&Research;
Other versions of this item:
- 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:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Raddatz, Claudio, 2009.
"Multilateral debt relief through the eyes of financial markets,"
Policy Research Working Paper Series
4872, The World Bank.
- Claudio Raddatz, 2011. "Multilateral Debt Relief through the Eyes of Financial Markets," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1262-1288, November.
- Silvia Marchesi & Alessandro Missale, 2012.
"Did high debts distort loans and grants allocation to IDA countries?,"
226, University of Milano-Bicocca, Department of Economics, revised Aug 2012.
- Marchesi, Silvia & Missale, Alessandro, 2013. "Did High Debts Distort Loan and Grant Allocation to IDA Countries?," World Development, Elsevier, vol. 44(C), pages 44-62.
- Bjørnskov, Christian & Schröder, Philipp J.H., 2013.
"Are debt repayment incentives undermined by foreign aid?,"
Journal of Comparative Economics,
Elsevier, vol. 41(4), pages 1073-1091.
- Bjørnskov, Christian & Schröder, Philipp J.H., 2010. "Are Debt Repayment Incentives Undermined by Foreign Aid?," Working Papers 10-20, University of Aarhus, Aarhus School of Business, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.