IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Foreign aid and developing countries' creditworthiness

Listed author(s):
  • Philipp Harms

    ()

    (Study Center Gerzensee and University of Konstanz)

  • Michael Rauber

    ()

    (University of Konstanz)

We explore whether foreign aid affects developing countries' creditworthiness, as proxied by the Institutional Investor's measure of country credit risk. Based on a simple model of international borrowing and lending, we develop the hypothesis that aid reduces the likelihood that borrowers in a given country default on their foreign debt. We then test this hypothesis, using a panel data set that covers a large number of developing countries in the 1980s and 1990s. Our empirical findings support the notion that aid improves countries' standing vis-a-vis international capital markets. However, the strength of this effect differs across types of aid and country groups.

If 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.

File URL: http://www.szgerzensee.ch/fileadmin/Dateien_Anwender/Dokumente/working_papers/wp-0405.pdf
File Function: Full text
Download Restriction: None

Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 04.05.

as
in new window

Length: 38 pages
Date of creation: Jul 2004
Handle: RePEc:szg:worpap:0405
Contact details of provider: Postal:
Studienzentrum Gerzensee, Postfach 21, 3115 Gerzensee

Phone: ++41 (0)31 780 31 31
Fax: ++41 (0)31 780 31 00
Web page: http://www.szgerzensee.ch/
Email:

Order Information: Postal: Studienzentrum Gerzensee, Postfach 21, 3115 Gerzensee
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Hansen, Henrik & Tarp, Finn, 1999. "Aid Effectiveness Disputed," MPRA Paper 62290, University Library of Munich, Germany.
  2. Jensen, Peter Sandholt & Paldam, Martin, "undated". "Can the new aid-growth models be replicated," Economics Working Papers 2003-17, Department of Economics and Business Economics, Aarhus University.
  3. Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  4. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  5. Abdelhak S Senhadji & Mohsin S. Khan, 2000. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Working Papers 00/110, .
  6. Charles C. Chang & Eduardo Fernández-Arias & Luis Servén, 1998. "Measuring Aid Flows: A New Approach," IDB Publications (Working Papers) 6447, Inter-American Development Bank.
  7. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  8. repec:rus:hseeco:123922 is not listed on IDEAS
  9. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
  10. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  11. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  12. Philipp Harms & Matthias Lutz, 2003. "Aid, Governance, and Private Foreign Investment: Some Puzzling Findings and a Possible Explanation," Working Papers 03.04, Swiss National Bank, Study Center Gerzensee.
  13. David Roodman, 2007. "The Anarchy of Numbers: Aid, Development, and Cross-Country Empirics," World Bank Economic Review, World Bank Group, vol. 21(2), pages 255-277, May.
  14. Joshua Aizenman, 1986. "Country Risk, Asymmetric Information and Domestic Policies," NBER Working Papers 1880, National Bureau of Economic Research, Inc.
  15. Hansen, Henrik & Tarp, Finn, 2000. "Aid and Growth Regressions," MPRA Paper 62288, University Library of Munich, Germany.
  16. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1986. "The Pure Theory of Country Risk," NBER Working Papers 1894, National Bureau of Economic Research, Inc.
  17. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  18. Joshua Aizenman, 1987. "Country Risk and Contingencies," NBER Working Papers 2236, National Bureau of Economic Research, Inc.
  19. Guillermo Larraín & Helmut Reisen & Julia von Maltzan, 1997. "Emerging Market Risk and Sovereign Credit Ratings," OECD Development Centre Working Papers 124, OECD Publishing.
  20. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  21. Ciocchini, Francisco & Durbin, Erik & Ng, David T. C., 2003. "Does corruption increase emerging market bond spreads?," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 503-528.
  22. Nadeem Ul Haque & Manmohan S. Kumar & Nelson Mark & Donald J. Mathieson, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 688-724, December.
  23. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
  24. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  25. Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
  26. International Monetary Fund, 1998. "The Relative Importance of Political and Economic Variables in Creditworthiness Ratings," IMF Working Papers 98/46, .
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:szg:worpap:0405. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (library)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.