World Bank Lending and the Quality of Economic Policy

This study investigates the impact of World Bank development policy lending on the quality of economic policy. It finds that the quality of policy increases, but at a diminishing rate, with the cumulative number of policy loans. Similar results hold for the cumulative number of conditions attached t...

Full description

Bibliographic Details
Main Authors:	Smets, Lodewijk, Knack, Stephen
Format:	Journal Article
Language:	en_US
Published:	Taylor and Francis 2015
Subjects:	development policy lending economic policy aid efficacy
Online Access:	http://hdl.handle.net/10986/23525

id	okr-10986-23525
recordtype	oai_dc
spelling	okr-10986-235252021-04-23T14:04:15Z World Bank Lending and the Quality of Economic Policy Smets, Lodewijk Knack, Stephen development policy lending economic policy aid efficacy This study investigates the impact of World Bank development policy lending on the quality of economic policy. It finds that the quality of policy increases, but at a diminishing rate, with the cumulative number of policy loans. Similar results hold for the cumulative number of conditions attached to policy loans, although quadratic specifications indicate that additional conditions may even reduce the quality of policy beyond some point. The paper measures the quality of economic policy using the World Bank’s Country Policy and Institutional Assessments of macro, debt, fiscal, and structural policies, and considers only policy loans targeted at improvements in those areas. Previous studies finding weaker effects of policy lending on macro stability have failed to distinguish loans primarily intended to improve economic policy from other loans targeted at improvements in sector policies or in public management. The paper also shows that investing in economic policy does not ‘crowd out’ policy improvements in other areas, such as public sector governance or human development. The results are robust to using alternative indicators of policy quality and correcting for endogeneity with system generalized methods of moments and cross-sectional two-stage least squares. The more positive results in the study relative to some previous studies are consistent with claims by the World Bank that it has learned from its mistakes with traditional adjustment lending. 2015-12-28T19:02:32Z 2015-12-28T19:02:32Z 2015-10-09 Journal Article The Journal of Development Studies 0022-0388 http://hdl.handle.net/10986/23525 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Taylor and Francis Publications & Research :: Journal Article Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	development policy lending economic policy aid efficacy
spellingShingle	development policy lending economic policy aid efficacy Smets, Lodewijk Knack, Stephen World Bank Lending and the Quality of Economic Policy
description	This study investigates the impact of World Bank development policy lending on the quality of economic policy. It finds that the quality of policy increases, but at a diminishing rate, with the cumulative number of policy loans. Similar results hold for the cumulative number of conditions attached to policy loans, although quadratic specifications indicate that additional conditions may even reduce the quality of policy beyond some point. The paper measures the quality of economic policy using the World Bank’s Country Policy and Institutional Assessments of macro, debt, fiscal, and structural policies, and considers only policy loans targeted at improvements in those areas. Previous studies finding weaker effects of policy lending on macro stability have failed to distinguish loans primarily intended to improve economic policy from other loans targeted at improvements in sector policies or in public management. The paper also shows that investing in economic policy does not ‘crowd out’ policy improvements in other areas, such as public sector governance or human development. The results are robust to using alternative indicators of policy quality and correcting for endogeneity with system generalized methods of moments and cross-sectional two-stage least squares. The more positive results in the study relative to some previous studies are consistent with claims by the World Bank that it has learned from its mistakes with traditional adjustment lending.
format	Journal Article
author	Smets, Lodewijk Knack, Stephen
author_facet	Smets, Lodewijk Knack, Stephen
author_sort	Smets, Lodewijk
title	World Bank Lending and the Quality of Economic Policy
title_short	World Bank Lending and the Quality of Economic Policy
title_full	World Bank Lending and the Quality of Economic Policy
title_fullStr	World Bank Lending and the Quality of Economic Policy
title_full_unstemmed	World Bank Lending and the Quality of Economic Policy
title_sort	world bank lending and the quality of economic policy
publisher	Taylor and Francis
publishDate	2015
url	http://hdl.handle.net/10986/23525
_version_	1764454090512793600

World Bank Lending and the Quality of Economic Policy

Similar Items