Conditionality, Commitment and Investment Response in LDCs
Mariarosaria Agostino ()
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Mariarosaria Agostino: Department of Economics and Statistics, University of Calabria, Italy, Postal: 87036 Arcavacata di Rende
Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Abstract:
The private investment response to structural reforms in developing countries is of paramount importance, both for the future economic growth and the survival of the reforms themselves. By employing a sample of countries, recipients of World Bank Structural Adjustment Loans, the present paper assesses whether agreements, including policy conditionality, represent a positive signal for the private sector and translate into capital formation. The empirical investment equation adopted is estimated using dynamic panel data econometric methods, allowing for simultaneity and country-specific effects. The main result obtained is that, while a higher propensity to commit does not seem to affect the private investment response, a higher percentage of tied funds might impact negatively on the demand of fixed investment.
Keywords: Conditional aid; policy uncertainty; investment response; dynamic panel methods. (search for similar items in EconPapers)
JEL-codes: C23 E22 F35 (search for similar items in EconPapers)
Pages: 35
Date: 2004-10-19
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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2004-10
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