How defensive were lending and aid to HIPC?
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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