Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128026
Authors: 
Harms, Philipp
Rauber, Michael
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Study Center Gerzensee 04.05
Abstract: 
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 current aid reduces the likelihood of future default. We then test this hypothesis, using a data set that covers a large number of developing countries in the 1980s and 1990s. While the size of the effect differs across types of aid and country groups, our empirical findings support the notion that aid improves countries' standing vis-a-vis international capital markets.
Subjects: 
Aid
International Investment
Country Risk
Dynamic Panel Estimation
JEL: 
F34
F35
O16
O19
Document Type: 
Working Paper

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