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Official Development Assistance |
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What is official development assistnce (ODA)?
The term "Official Development Assistance" (ODA) was defined by the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) in 1972. According to this definitiion, ODA consists of flows of funds to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agenices, each transaction of which meets the following test:
- It is administered with the promotion of the economic development and welfare of developing countries as its main objective, and
- it is concessional in character and contains a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent).
Who are the donors and recipients?
Donors are all OECD countries. Because all OECD countries are developed countries, the donors are developed countries. Examples include the United States, Japan, Germany, Canada, etc. Amount of donation is often reported as a percentage of GNP. The recipients are those developing and least developed countires.
Development of ODA
OECD came into operation in September 1961. Pakistan, Canada, Kuwait, France, the United States, Germany, Japan, Swedem, and the Swiss were the first countries that join the aid programme. In 1969 DAC adopts the Official Development assistance (ODA) concept.
Objective of ODA
The "official" objective of ODA is to support sustainable development, reduce poverty and build viable economies and societies, and generate the capacity for beneficial participation in the world economy. However, every donor country will have its own political and economic objectives, reflected in their chosen receipient countries and supported projects.
Effectiveness of aid
The ODA is concentrated on countires coping with particularly difficult problems. Official development assistance is not investment banking. It's therefore not directed to the countries with the highest potential investment returns. Aid is not only concentrated on countries with the most difficult and intractable development problems; sustantial amounts of it must be used to cope with emergency situations arising from natural calamities, refugee influxes or strife. It is not at all surprising, therefore, that many of the major aid recipients are not among the fast-growing countries. Assessments of aid effectiveness has been done but most of these assessments are not conclusive.
ODA versus Private Flows?
ODA are grants or Loans to countries and territories (DAC List of Aid Recipients - developing countries) which are:
- undertaken by official sector;
- with promotion of economic development and welfare as the main objective;
- at concessional financial terms
Private flows consists of flows of funds at market terms financed out of private sector resources (i.e. changes in holdings of private long term assests held by residents of the reporting country) and private grants (i.e. grans by non government orgranizations, net of subsidies received from the official sector):
- International Bank Lending
- Bond Lending
- Other private lending - Private Export Credits
Form of donoation
Donation takes the form of
- Bilateral Flows: They are provied directly by a donor country to an aid recipient country.
- Multilateral Flows: They are channelled via an international organisation ative in development (e.g. World Bank, UNDP)
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Keywords:
Official development assistance, OECD, Economic Aid |
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Links
Untitled Document
Links related to Official development assistance
(5 out of 5
links are shown. Complete list of links can be found at here.)
Untitled Document
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Singapore Exchange |
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URL:
http://www.ses.com.sg/ |
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Inaugurated on December 1, 1999, Singapore Exchange is the first demutualised, integrated securities and derivatives exchange in Asia Pacific. There are 5 market divisions: Securities Trading, Derivatives Trading, Securities Clearing and Depository, Derivatives Clearing, and the IT Solutions divisions. And the 5 service divisions are: Corporate Strategy and Marketing, Finance and Administration, Human Resources, Information Technology, and Risk Management and Regulation divisions.
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2444
visits has been made through our site. |
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Untitled Document
Untitled Document
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Osaka Securities Exchange |
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URL:
http://www.ose.or.jp/ |
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With Japanese and English version. |
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2058
visits has been made through our site. |
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Untitled Document
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New York Stock Exchange |
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URL:
http://www.nyse.com/ |
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New York Stock Exchange's mission is to add value to the capital-raising and asset-management process by providing the highest-quality and most cost-effective self-regulated marketplace for the trading of financial instruments, promote confidence in and understanding of that process, and serve as a forum for discussion of relevant national and international policy issues.
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2045
visits has been made through our site. |
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Untitled Document
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South African Futures Exchange |
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URL:
http://www.safex.co.za/ |
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South African Futures Exchange |
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1792
visits has been made through our site. |
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Untitled Document
Links related to OECD
(5 out of 43
links are shown. Complete list of links can be found at here.)
Untitled Document
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Resources |
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URL:
http://kafuwong.econ.cuhk.edu.hk/teaching/iresources.htm |
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Resources for studying Economics include news, reports, economic and financial analysis, on-line exchange rate, historical data, stock exchanges, central banks, currency board, debt crisis, Asian crisis, international organizations, petroleum, etc. |
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2909
visits has been made through our site. |
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Untitled Document
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Singapore Exchange |
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URL:
http://www.ses.com.sg/ |
| |
Inaugurated on December 1, 1999, Singapore Exchange is the first demutualised, integrated securities and derivatives exchange in Asia Pacific. There are 5 market divisions: Securities Trading, Derivatives Trading, Securities Clearing and Depository, Derivatives Clearing, and the IT Solutions divisions. And the 5 service divisions are: Corporate Strategy and Marketing, Finance and Administration, Human Resources, Information Technology, and Risk Management and Regulation divisions.
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2444
visits has been made through our site. |
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Untitled Document
Untitled Document
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Osaka Securities Exchange |
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URL:
http://www.ose.or.jp/ |
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With Japanese and English version. |
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2058
visits has been made through our site. |
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|
Untitled Document
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New York Stock Exchange |
| |
URL:
http://www.nyse.com/ |
| |
New York Stock Exchange's mission is to add value to the capital-raising and asset-management process by providing the highest-quality and most cost-effective self-regulated marketplace for the trading of financial instruments, promote confidence in and understanding of that process, and serve as a forum for discussion of relevant national and international policy issues.
|
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2045
visits has been made through our site. |
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Untitled Document
Links related to Economic Aid
(5 out of 27
links are shown. Complete list of links can be found at here.)
Untitled Document
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Essential Principles of Economics: A Hypermedia Text |
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URL:
http://william-king.www.drexel.edu/top/prin/txt/EcoToC.html |
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Serving as a overview of economics for beginners, this site is based of the lecture notes of Roger Ashton McCain III, a professor of economics at Drexel University. The text's 31 chapters are divided into two sections which cover both Microeconomics and Macroeconomics. Each chapter includes an overview and multiple choice questions to quiz users's comprehension, and the text includes hypertext icons that lead to citations, observations, explanations, and equations. Professor McCain views his site as a work-in-progress as well as a textbook, and continues to revise the site. |
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3357
visits has been made through our site. |
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|
Untitled Document
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Resources |
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URL:
http://kafuwong.econ.cuhk.edu.hk/teaching/iresources.htm |
| |
Resources for studying Economics include news, reports, economic and financial analysis, on-line exchange rate, historical data, stock exchanges, central banks, currency board, debt crisis, Asian crisis, international organizations, petroleum, etc. |
| |
2909
visits has been made through our site. |
| |
|
Untitled Document
|
Singapore Exchange |
| |
URL:
http://www.ses.com.sg/ |
| |
Inaugurated on December 1, 1999, Singapore Exchange is the first demutualised, integrated securities and derivatives exchange in Asia Pacific. There are 5 market divisions: Securities Trading, Derivatives Trading, Securities Clearing and Depository, Derivatives Clearing, and the IT Solutions divisions. And the 5 service divisions are: Corporate Strategy and Marketing, Finance and Administration, Human Resources, Information Technology, and Risk Management and Regulation divisions.
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2444
visits has been made through our site. |
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Untitled Document
Untitled Document
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Osaka Securities Exchange |
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URL:
http://www.ose.or.jp/ |
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With Japanese and English version. |
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2058
visits has been made through our site. |
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References
Untitled Document
References related to Official development assistance
(5 references
are shown.)
Untitled Document
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Aid, Policies, and Growth
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Author:
Burnside, Craig, and David Dollar
Book: American Economic Review |
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Year:
2000 Vol: Vol. 90, No. 4, pp. 847-868. |
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The paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. The paper finds that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact ont eh allocation of aid. Their results suggest that aid would be more effective if it were more systematically conditioned on good policy. |
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Remarks:
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Untitled Document
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Politics and the Effectiveness of Foreign Aid
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Author:
Boone, Peter
Book: European Economic Review |
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Year:
1996 Vol: 40(2), pages 289-329.
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Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper the author tests predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes. The study finds that aid does not significantly increase investment, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. The impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short-term aid targeted to support new liberal regimes 'may' be a more successful means of reducing poverty than current programs.
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Remarks:
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Untitled Document
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Aid and Growth in Sub-Saharan Africa: The Recent Experience
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Author:
Levy, Victor
Book: European Economic Review; |
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Year:
1998 Vol: 32(9), pages 1777-95.
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This paper presents some quantitative evidence on the relationship between foreign aid and economic growth in the low income countries of Sub-Saharan Africa. Two key findings are presented. First, aid is positively and significantly correlated with investment and economic growth in Africa. Second, fix capital formation contributed to the rate of growth. The second result, which emerges from analyzing time series data, is somewhat surprising given the disappointing economic performance of African countries since the early 1970s.
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Remarks:
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Untitled Document
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Estimating Aid-Allocation Criteria with Panel Data
|
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Author:
Trumbull, William N.; Wall, Howard J.
Book: Economic Journal |
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Year:
1994 Vol: 104(425),pages 876-82.
|
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In 1990, the net amount of economic aid, or official development assistance, to all recipients from all multilateral and bilateral sources was about $62 billion, an amount that exceeded the GDPs of Greece and Portugal. Despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs. As a result, there is little agreement about the extent to which ODA is allocated according to the needs of the recipient countries. The purpose of this paper is to develop a rigorous theoretical model of ODA allocation that can be used to provide consistent estimates of the importance of recipient needs.
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Remarks:
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Untitled Document
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Aid, the Public Sector and the Market in Less Developed Countries
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Author:
Paul Mosley, John Hudson, Sara Horrell
Book: The Economic Journal |
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Year:
1987 Vol: Vol. 97, No. 387. pp. 616-641.
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The authors found in this study that it is impossible to establish any statistically significant correlation between aid and the growth rate of GNP in developing countries. The suggest to explain this phenomenon by the possible leakages of funds into non-productive expenditure in the public sector and of the transmission of negative price effects to the private sector. In the end, they suggested the donors to judge the effectiveness of their aids in a country by parameters in their model and to concentrate their aids to highly effective countries. |
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Remarks:
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Untitled Document
References related to OECD
(11 references
are shown.)
Untitled Document
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The Political Economy of the Korean Financial Crisis
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Author:
Haggard,Stephan; Mo,Jongryn
Book: Review-of-International-Political-Economy |
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Year:
2000 Vol: 7(2),pages 197-218.. |
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Much attention has been paid to the economics of the Asian financial crisis, but less to its politics. This article examines two clusters of domestic political factors that contributed to Korea's difficulties. First, a combination of selective liberalization with close government-bank-business relations contributed to the investment boom and excessive leveraging that made the Korean economy vulnerable to external shocks. Second, it examines how politically generated uncertainty in an election year, compounded by features of the party system, resulted in a delayed response to problems in the financial sector and in dealing with the IMF. These delays, in turn, contributed to the length and depth of the crisis.
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Remarks:
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The Impact of Financial and Fiscal Variables on Economic Growth: The Case of India and Korea
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Author:
Dua, Pami; Rashid, Aneesa Ismail; Salvatore, Dominick
Book: International-Economic-Journal |
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Year:
2000 Vol: 14(2),pages 133-50. |
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This paper applies a simple macroeconomic model developed by Green and Murinde (1993) to Korea and India and studies the potency of fiscal and financial policies. The fiscal variables are real government spending, the income tax rate, and the export tax rate; while financial policy variables are the official interest rate, loans from commercial banks, foreign reserves or the exchange rate and foreign capital inflows. Dummies for political instability and financial reforms specific to the two countries are also included. We find that while government expenditure, income taxes and foreign capital inflows have the same effects in the two countries, interest rates, money supply, foreign reserves and financial liberalization have different effects, bringing out the differences in the two economies.
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Remarks:
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Financial Liberalization and Money Demand in the ASEAN Countries
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Author:
Dekle,Robert; Pradhan,Mahmood
Book: International-Journal-of-Finance-and-Economics |
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Year:
1999 Vol: 4(3),pages 205-15.
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This paper estimates long-run money demand equations for the ASEAN-4 countries (Indonesia, Malaysia, Singapore, and Thailand) and evaluates whether the equations are cointegrated. Despite the substantial financial liberalization that has taken place in these countries, it finds that the money demand equations are cointegrated. In sum, the results show that provided that the monetary authorities know the shape of these money demand equations, a policy framework aimed around monetary targets can be implemented.
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Remarks:
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Untitled Document
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Emerging Markets and Macroeconomic Stabilization: With Special Reference to Asia Pacific Economies
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Author:
Das, Dilip K.
Book: Journal-of-the-Asia-Pacific-Economy |
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Year:
1996 Vol: 1(3),pages 319-46. |
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Market forces, structural factors, financial liberalization and concerted policy measures coalesced to globalize the financial markets. Initially Asia Pacific economies did not receive much attention from the international capital market but by 1990s the scenario underwent a considerable transformation. Rapid growth, macroeconomic stability and strong fundamentals made the region exceedingly attractive to international investors. Consequently, the region was highly successful in attracting foreign direct investment and securitized capital, which includes both equity and international bond investment. Volatility of securitized capital has always been a cause of worry. It is influenced by both the global factors and country-economy-related factors. Capital inflows have a great deal of impact on the demand for credit and money supply in the recipient economy. The Asia Pacific economies were highly successful in sterilizing the capital inflows. Volatility in external financial inflows can be notoriously destabilizing. Most large importers of securitized capital resort to moderate currency appreciation. Sterilized intervention was found to be the most preferred strategy in the Asia Pacific region. But this strategy cannot be followed too aggressively without tightening the fiscal policy. The paper also focuses in macroeconomic stabilization measures as well as individually on seven regional economies.
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Remarks:
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Untitled Document
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Financial Liberalization, Property Rights, and Growth in an Overlapping-Generations Model
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Author:
Bellettini, Giorgio; Berti Ceroni, Carlotta
Book: Review-of-International-Economics |
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Year:
2000 Vol: 8(2), pages 348-59. |
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Using an endogenous growth model in which countries differ with respect to property rights protection, the paper analyzes the growth and welfare effects of removing capital controls, and studies the political support for a reform which improves the quality of property rights. When these are poorly protected, liberalization of capital movements may foster growth in the short run but eliminates it in the long run. The removal of capital controls may benefit agents at the time of liberalization, hurting future generations. Ceteris paribus, political support for a reform of property rights is stronger in the closed than in the open economy.
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Remarks:
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Untitled Document
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The story of official development assistance: A history of the development assistance committee and the development co-operation directorate in dates, names and figures
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Author:
Fuhrer, Helmut |
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Year:
1996 |
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Remarks:
The book is available on-line at http://www.oecd.org/dac/pdf/storyoda.pdf
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Untitled Document
|
Aid, Policies, and Growth
|
| |
Author:
Burnside, Craig, and David Dollar
Book: American Economic Review |
| |
Year:
2000 Vol: Vol. 90, No. 4, pp. 847-868. |
| |
The paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. The paper finds that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact ont eh allocation of aid. Their results suggest that aid would be more effective if it were more systematically conditioned on good policy. |
| |
Remarks:
|
| |
|
Untitled Document
|
Politics and the Effectiveness of Foreign Aid
|
| |
Author:
Boone, Peter
Book: European Economic Review |
| |
Year:
1996 Vol: 40(2), pages 289-329.
|
| |
Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper the author tests predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes. The study finds that aid does not significantly increase investment, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. The impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short-term aid targeted to support new liberal regimes 'may' be a more successful means of reducing poverty than current programs.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Aid and Growth in Sub-Saharan Africa: The Recent Experience
|
| |
Author:
Levy, Victor
Book: European Economic Review; |
| |
Year:
1998 Vol: 32(9), pages 1777-95.
|
| |
This paper presents some quantitative evidence on the relationship between foreign aid and economic growth in the low income countries of Sub-Saharan Africa. Two key findings are presented. First, aid is positively and significantly correlated with investment and economic growth in Africa. Second, fix capital formation contributed to the rate of growth. The second result, which emerges from analyzing time series data, is somewhat surprising given the disappointing economic performance of African countries since the early 1970s.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Estimating Aid-Allocation Criteria with Panel Data
|
| |
Author:
Trumbull, William N.; Wall, Howard J.
Book: Economic Journal |
| |
Year:
1994 Vol: 104(425),pages 876-82.
|
| |
In 1990, the net amount of economic aid, or official development assistance, to all recipients from all multilateral and bilateral sources was about $62 billion, an amount that exceeded the GDPs of Greece and Portugal. Despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs. As a result, there is little agreement about the extent to which ODA is allocated according to the needs of the recipient countries. The purpose of this paper is to develop a rigorous theoretical model of ODA allocation that can be used to provide consistent estimates of the importance of recipient needs.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Aid, the Public Sector and the Market in Less Developed Countries
|
| |
Author:
Paul Mosley, John Hudson, Sara Horrell
Book: The Economic Journal |
| |
Year:
1987 Vol: Vol. 97, No. 387. pp. 616-641.
|
| |
The authors found in this study that it is impossible to establish any statistically significant correlation between aid and the growth rate of GNP in developing countries. The suggest to explain this phenomenon by the possible leakages of funds into non-productive expenditure in the public sector and of the transmission of negative price effects to the private sector. In the end, they suggested the donors to judge the effectiveness of their aids in a country by parameters in their model and to concentrate their aids to highly effective countries. |
| |
Remarks:
|
| |
|
Untitled Document
References related to Economic Aid
(21 references
are shown.)
Untitled Document
|
The story of official development assistance: A history of the development assistance committee and the development co-operation directorate in dates, names and figures
|
| |
Author:
Fuhrer, Helmut |
| |
Year:
1996 |
| |
|
| |
Remarks:
The book is available on-line at http://www.oecd.org/dac/pdf/storyoda.pdf
|
| |
|
Untitled Document
|
Aid, Policies, and Growth
|
| |
Author:
Burnside, Craig, and David Dollar
Book: American Economic Review |
| |
Year:
2000 Vol: Vol. 90, No. 4, pp. 847-868. |
| |
The paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. The paper finds that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact ont eh allocation of aid. Their results suggest that aid would be more effective if it were more systematically conditioned on good policy. |
| |
Remarks:
|
| |
|
Untitled Document
|
Politics and the Effectiveness of Foreign Aid
|
| |
Author:
Boone, Peter
Book: European Economic Review |
| |
Year:
1996 Vol: 40(2), pages 289-329.
|
| |
Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper the author tests predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes. The study finds that aid does not significantly increase investment, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. The impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short-term aid targeted to support new liberal regimes 'may' be a more successful means of reducing poverty than current programs.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Aid and Growth in Sub-Saharan Africa: The Recent Experience
|
| |
Author:
Levy, Victor
Book: European Economic Review; |
| |
Year:
1998 Vol: 32(9), pages 1777-95.
|
| |
This paper presents some quantitative evidence on the relationship between foreign aid and economic growth in the low income countries of Sub-Saharan Africa. Two key findings are presented. First, aid is positively and significantly correlated with investment and economic growth in Africa. Second, fix capital formation contributed to the rate of growth. The second result, which emerges from analyzing time series data, is somewhat surprising given the disappointing economic performance of African countries since the early 1970s.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Estimating Aid-Allocation Criteria with Panel Data
|
| |
Author:
Trumbull, William N.; Wall, Howard J.
Book: Economic Journal |
| |
Year:
1994 Vol: 104(425),pages 876-82.
|
| |
In 1990, the net amount of economic aid, or official development assistance, to all recipients from all multilateral and bilateral sources was about $62 billion, an amount that exceeded the GDPs of Greece and Portugal. Despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs. As a result, there is little agreement about the extent to which ODA is allocated according to the needs of the recipient countries. The purpose of this paper is to develop a rigorous theoretical model of ODA allocation that can be used to provide consistent estimates of the importance of recipient needs.
|
| |
Remarks:
|
| |
|
Untitled Document
|
Aid, the Public Sector and the Market in Less Developed Countries
|
| |
Author:
Paul Mosley, John Hudson, Sara Horrell
Book: The Economic Journal |
| |
Year:
1987 Vol: Vol. 97, No. 387. pp. 616-641.
|
| |
The authors found in this study that it is impossible to establish any statistically significant correlation between aid and the growth rate of GNP in developing countries. The suggest to explain this phenomenon by the possible leakages of funds into non-productive expenditure in the public sector and of the transmission of negative price effects to the private sector. In the end, they suggested the donors to judge the effectiveness of their aids in a country by parameters in their model and to concentrate their aids to highly effective countries. |
| |
Remarks:
|
| |
|
Untitled Document
|
IMF Conditionality and Objections: The Russian Case
|
| |
Author:
Martinez Vazquez, Jorge, et al..
Book: American Journal of Economics and Sociology |
| |
Year:
2001 Vol: 60(2), pages 501-17.
|
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Emerging economies in crisis typically request assistance from the International Monetary Fund (IMF). After evaluating the situation, the IMF makes a loan available to the country, conditional on certain policy reforms. Governments usually resist many of these measures and negotiation ensues. This paper analyzes the most contentious measures of IMF conditionality in the context of Russia after the August 1998 crisis. The most discussed measures include the budget deficit, structural reforms, and exchange rate policy. Our analysis suggests that to some extent the disagreement arose because the IMF is focused on changing steady states somewhat ignoring the transition path, while the Russian government is preoccupied with transitional dynamics without a clearly defined steady state concept.
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Remarks:
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Untitled Document
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Structural adjustment and growth in sub-Saharan Africa: The importance of complying with conditionality
|
| |
Author:
Farhad Noorbakhsh;Alberto Paloni
Book: Economic Development and Cultural Change |
| |
Year:
2001 Vol: 49(3), pages 479-509..
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Structural adjustment has dominated policy making in sub-Saharan Africa since the early 1980s. However, whether structural adjustment programs have been beneficial for the economies of the countries involved is a controversial matter. Some scholars contend that the adjustment policies supported by the World Bank in Africa are inappropriate and they advocate the adoption of a more eclectic and pragmatic approach. This article discusses the evaluation of adjustment programs on the basis of compliance with policy conditionality and also gives a description of the World Bank index of compliance. The effect of compliance on economic performance is discussed and the persistence of compliance effects are investigated.
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Remarks:
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Untitled Document
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Optimal Bail Out Policy, Conditionality and Constructive Ambiguity
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Author:
Freixas, Xavier
Book: Universitat Pompeu Fabra, Economics and Business Working Paper |
| |
Year:
1999 Vol: 400, October 1999, pages 31.
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This paper addresses the issue of the optimal behavior of the Lender of Last Resort (LOLR) in its microeconomic role regarding individual financial institutions in distress. It has been argued that the LOLR should not intervene at the microeconomic level and let any defaulting institution face the market discipline, as it will be confronted with the consequences of the risks it has taken. By considering a simple cost benefit analysis we show that this position may lack a sufficient foundation. We establish that, instead, under reasonable assumptions, the optimal policy has to be conditional on the amount of uninsured debt issued by the defaulting bank. Yet in equilibrium, because the rescue policy is costly, the LOLR will not rescue all the banks that fulfill the uninsured debt requirement condition, but will follow a mixed strategy. This we interpret as the confirmation of the "creative ambiguity" principle, perfectly in line with the central bankers claim that it is efficient for them to have discretion in lending to individual institutions. Alternatively, in other cases, when the social cost of a bank's bankruptcy is too high, it is optimal for the LOLR to bail out the institution, and this gives support to the "too big to fail" policy.
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The Effectiveness of Conditionality and the Political Economy of Policy Reform: Is It Simply a Matter of Political Will?
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Author:
Bird, Graham
Book: Journal of Policy Reform |
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Year:
1998 Vol: 2(1), pages 89-113.
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Although widely used by international financial institutions, policy conditionality often fails in the sense that countries do not fully implement it. Up to now most research has focused on the design of conditionality. This paper, however, uses political economy analysis to address the issue of non-compliance. Either governments agree to conditions with little intention of carrying them through, or circumstances change the benefit-cost ratio of compliance. Analysis of these circumstances points to ways in which conditionality might usefully be reformed.
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The Financial Benefit of the IMF
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Author:
Bakker, Age F. P.; Schrijvers, Martijn A.
Book: Banca Nazionale del Lavoro Quarterly Review |
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Year:
2000 Vol: 53(214), pages 245-65.
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The IMF provides loans to countries in financial distress at a relatively low interest rate. In this article the authors calculate how much the seven largest debtors to the IMF have saved on interest payments during the Asian crisis and its aftermath. The authors explain how the IMF can charge these low interest rates and at what cost for creditor countries. The conditionality attached to the use of IMF resources in the form of policy measures reduces moral hazard behaviour; they argue that this is a better instrument than raising interest rates on IMF loans. |
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Incentive Mechanisms Surrounding International Financial Institutions
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Author:
Hamada, Koichi
Book: Asian Development Review |
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Year:
1998 Vol: 16(1), pages 126-48..
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This paper applies the common agency framework and the theory of nonprofit organization to the functioning of international financial institutions (IFIs) such as the IMF, IBRD, and ADB. Webs of intricate monitoring networks exist among member countries of an institution, its secretariat, and countries that receive financial support in exchange for conditionality. The paper will show, under the assumption of risk averse institutions and risk neutral members, that (i) the power of monitoring will be normally weakened if the IFI has an independent objective distinct from that of members; (ii) two or more IFIs will help the members unless external diseconomies exist among them; (iii) the free-rider problem of public goods can be resolved by conditionality but under a strict condition of perfect appropriability of surplus by principals, and (iv) if the IFI is situated between two risk neutral members like donor countries and recipient countries of IFI support, then the weakening of the power of monitoring disappears.
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What Diagnosis for Europe's Ailing Regions?
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Author:
Hurst, Christopher; Thisse, Jacques Francois; Vanhoudt, Patrick
Book: EIB Papers |
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Year:
2000 Vol: 5(1), pages 9-29.
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The paper starts with a brief overview of the reasons behind persistent regional dispersion. It then draws on several case studies to identify common features behind regional (non-)convergence, and looks at the suitability of various policy approaches. The paper focuses next on the rationale behind national and supra-national support. It is argued that, while at the national level the main aim of regional policies is to reduce the cost of labour market policies, the motivation behind EU transfers is less straightforward. Here, regional assistance should rather be seen in the context of side-payments between governments to reach agreement on other matters. In order to reduce the possibility of future payments--and thus, institutional sclerosis--these transfers should ideally be growth-inducing. Therefore, the paper provides a discussion of conditionality on the use of EU loans and grants, and concludes with a number of recommendations regarding the structure of public policy interventions.
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Foreign Transfers and Tropical Deforestation: What Terms of Conditionality?
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Author:
Soest, Daan; Lensink, Robert
Book: American Journal of Agricultural Economics |
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Year:
2000 Vol: 82(2), pages 389-99.
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The international community considers the possibility of using aid as an instrument to improve natural resource conservation in developing countries. By making the amount of transfers dependent on the efforts of the recipient countries to improve conservation, appropriate incentives can be given. The authors propose a transfer function in which developing countries are linearly rewarded for having a positive stock of forest, and where the amount of donations is negatively related to the rate of deforestation. This transfer function enables the international community to improve long-term forest conservation as well as the rate of deforestation during the adjustment period.
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The Timing of Multilateral Lending
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Author:
Perraudin, William; Sibert, Anne
Book: Economic Journal |
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Year:
2000 Vol: 110(460), pages 192-211..
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Bargaining over the terms of multilateral lending can be a prolonged process. The authors model failure to come to quick agreement as a screening device. Policy makers who find conditionality especially costly delay to signal their type. This paper show that increased costs to not reaching agreement, whether borne by borrowers or lenders, can increase the chances of delay.
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When Is Foreign Aid Policy Credible? Aid Dependence and Conditionality
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Author:
Svensson, Jakob
Book: Journal of Development Economics |
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Year:
2000 Vol: 61(1), pages 61-84..
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Disbursements of foreign aid are guided (in part) by the needs of the poor. Anticipating this, recipients have little incentive to improve the welfare of the poor. In principle, conditionality could partly solve the problem, but this requires a strong commitment ability by the donor. Without such a commitment technology, aid will be allocated (partly) to those in most need, and the recipient governments will exert low effort in alleviating poverty. Contrary to conventional wisdom in the aid literature, the authors show that tied project aid and delegation of part of the aid budget to an (international) agency with less aversion to poverty improve welfare of the poor in the recipient countries.
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Aid, Taxation and Development in Sub-Saharan Africa
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Author:
Adam, Christopher S.; O'Connell, Stephen A.
Book: Economics and Politics |
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Year:
1999 Vol: 11(3), pages 225-53.
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External aid donors have gradually shifted from a benign view of the African state to one that presumes a conflict of interest between the state and its own private sector. What are the implications of this diagnosis for the design of aid programs? The authors develop a model that locates slow growth in the overly narrow interests of a political elite. They study the impact of aid on policy choice and private investment and the role of conditionality in securing the gains from aid. The results capture key features of the current diagnosis while underscoring the need for more sophisticated treatments of domestic political institutions, institutional change, and donor motivations.
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Aid Works--Let's Prove It!
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Author:
Herfkens, Eveline
Book: Journal of African Economies |
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Year:
1999 Vol: 8(4), pages 481-86.
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Now that strong international consensus has been reached on how to combat poverty, it is argued that words must be put into deeds. To improve effectiveness of aid, the Netherlands has decided to focus its programme on countries that perform well in terms of good policy and good governance. By doing this, the old style conditionality debate can be avoided. Donors' attitude towards recipients should become based on partnership, so that the recipient government can be in control. Reforms are needed both in making donor programmes more coherent and focused on development, and in making recipients' public expenditures better coordinated and managed.
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Clean-Ups, Conditionality and Adjustment: Why Institutions Matter in Mozambique
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Author:
Harrison, Graham
Book: Review of African Political Economy |
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Year:
1999 Vol: 26(81), pages 323-33.
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This article critically evaluates the nature of administrative reform in the context of conditionality and structural adjustment. Structural adjustment programs constitute the broader environment and prioritizations within which donors and creditors support institutional reform. This raises the questions concerning the ownership and purpose of reform, especially if one bears in mind the substantial inequality of power between individual severely-indebted states and multilateral creditors which enjoy the alignment of many bilateral donors behind their prognoses. One can identify some of the contradictions that this relationship produces through an examination of Mozambique's experience with donors in respect to corruption and anti-corruption strategies. Here, corruption constitutes part of the politics of adjustment, and the reforms which are to tackle it have to work on an institutional terrain which has already been subjected to the disintegrative effects of a decade of adjustment and minimally-controlled donor influence. All of this renders the idea--often at the base of much donor thinking concerning reform--of a stable and enlightened leadership motivated to implement rational/technical reform throughout government at best a simplification and at worst a misrepresentation.
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Aid and the political economy of policy change
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Author:
Killick, Tony
Book: With Ramani Gunatilaka and Ana Marr. |
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Year:
1998 Vol: London and New York: Routledge, 1998,pages xiv, 221..
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Considers the efficacy and limitations of conditionality as a means for international financial institutions to influence policy processes in countries receiving loans and explores whether there might be constructive alternatives to conditionality. Surveys existing multicountry, cross-section studies of the adjustment programs of the IMF and the World Bank to learn about the effectiveness of conditionality. Studies the adjustment experiences of Southeast Asia and Latin America in more detail, examining the role played by conditionality in these experiences. Considers weak government "ownership" of programs as an explanation for the failures of policy conditionality. Frames conditionality as an agency problem and confronts hypotheses derived from this analytical framework with evidence from World Bank experiences with twenty-one countries, focusing on the extent of interest conflicts between donors and loan recipients. Examines the adequacy of the incentives, both rewards and punishments, offered by donors for the implementation of their policy conditions. Discusses alternative approaches that aid agencies might use to bring about sustained improvements in policy in loan-recipient countries. Killick is Senior Research Fellow of the Overseas Development Institute, London. |
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Towards a More Effective Conditionality: An Operational Framework
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Author:
Leandro, Jose E.; Schafer, Hartwig; Frontini, Gaspar
Book: World Development |
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Year:
1999 Vol: 27(2), pages 285-99..
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The "inducement" function of conditionality has failed. Its intrusive, shortsighted and ineffective character is now increasingly criticized, and may have contributed, at least in part, to the poor growth performance associated with adjustment programs in sub-Saharan Africa. This article proposes a new approach to conditionality attached to adjustment programs. It is built around three main features: recipient ownership of the appropriate reform program, considered to be a key factor for success; a more long-term approach to economic reform, avoiding in particular the disruptive practice of stop-go disbursements, and enhanced donor coordination as a factor for greater aid efficiency. Its implementation should lead to greater aid selectivity in favor of reforming countries, increased responsibility for aid recipients to decide on the rhythm and sequencing of reforms, and smoother aid flows with less disruptive aid suspensions.
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