Why is there Multilateral Lending? / Dani Rodrik.

Format:

Book

Author/Creator:

Rodrik, Dani.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5160.

NBER working paper series no. w5160

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

Why should multilateral lending exist in a world where private capital markets are well developed and governments have their own bilateral aid programs? If lending by the World Bank, IMF, and regional development banks has an independent rationale, it must rest on advantages generated by the multilateral nature of these institutions. There are in principle two such advantages. First, since information on the quality of investment environments in different countries is in many ways a collective good, multilateral agencies are in a better position to internalize the externalities that may arise. This creates a rationale for multilateral lending in terms of information provision, particularly in terms of monitoring of government policies in recipient countries. Second, as long as multilateral agencies retain some degree of autonomy from the governments that own them, their interaction with recipient countries, while official in nature, can remain less politicized than inter- governmental links. This in turn endows multilateral agencies with an advantage in the exercise of conditionality, (that is, in lending that is conditional on changes in government policies). Neither of these two potential advantages of multilateral lending has much to do with lending per se. However, multilateral lending may be required to make these agencies' tasks incentive compatible. The empirical analysis reveals little evidence that multilateral lending has acted as a catalyst for private capital flows.

Notes:

Print version record

June 1995.