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 hol...

Full description

Bibliographic Details
Main Authors:	Smets, Lodewijk, Knack, Stephen
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCOUNTABILITY ADJUSTMENT LOANS ADVERSE EFFECTS AGRICULTURE AIC AUDITS BALANCE OF PAYMENTS BANK POLICY BASE YEAR BEST PRACTICE BOND BORROWING BORROWING COUNTRIES BUDGET DEFICITS BUSINESS CYCLE CHECKS COMMITMENT COMMITMENTS COMPARATIVE ECONOMICS CONDITIONALITY CORRUPTION COUNTERPART COUNTRY RISK CREDITORS DEBT DEBT POLICY DEBT SERVICE DEMOCRACIES DEMOCRACY DEMOCRATIC INSTITUTIONS DEREGULATION DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT POLICIES DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DIMINISHING RETURNS DISBURSEMENT DISBURSEMENTS DUMMY VARIABLE ECONOMETRICS ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC RISK ECONOMIC SYSTEMS ECONOMICS ECONOMIES OF SCALE EMPLOYMENT ENFORCEABILITY ENVIRONMENTAL POLICIES EQUATIONS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL SECTOR FINANCIAL SUPPORT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL POLICY FOREIGN AID FUNCTIONAL FORMS FUTURE RESEARCH GDP GDP PER CAPITA GOVERNMENT DEBT GOVERNMENT POLICIES GOVERNMENT SPENDING GROWTH MODELS HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES INCOME INCOME GROWTH INCOME LEVEL INFLATION INFLATION RATE INTERNATIONAL BANK INTERNATIONAL COURT INTERNATIONAL ECONOMICS INVESTIGATION INVESTING LENDERS LENDING DECISIONS LENDING INSTRUMENT LENDING PORTFOLIO LENDING PROGRAMS LENDING VOLUME LOAN LOAN AGREEMENT MACROECONOMIC ADJUSTMENT MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MARKET REFORM MONETARY POLICY OPEN MARKETS PER CAPITA INCOME POLITICAL ECONOMY POLITICAL LEADERS PRIVATE DEBT PRIVATE INVESTMENT PUBLIC SERVICES REAL GDP REGRESSION ANALYSIS REVENUE MOBILIZATION RULE OF LAW SAL SCALE EFFECTS SECURE PROPERTY RIGHTS STRUCTURAL ADJUSTMENT TOTAL DEBT TRADE POLICY TRANCHES TRANSPARENCY TRANSPORT URBAN DEVELOPMENT WORLD BANK LENDING WORLD BANK LOAN WORLD BANK LOANS
Online Access:	http://documents.worldbank.org/curated/en/2014/06/19680397/world-bank-lending-quality-economic-policy http://hdl.handle.net/10986/18754

id	okr-10986-18754
recordtype	oai_dc
spelling	okr-10986-187542021-04-23T14:03:49Z World Bank Lending and the Quality of Economic Policy Smets, Lodewijk Knack, Stephen ACCOUNTABILITY ADJUSTMENT LOANS ADVERSE EFFECTS AGRICULTURE AIC AUDITS BALANCE OF PAYMENTS BANK POLICY BASE YEAR BEST PRACTICE BOND BORROWING BORROWING COUNTRIES BUDGET DEFICITS BUSINESS CYCLE CHECKS COMMITMENT COMMITMENTS COMPARATIVE ECONOMICS CONDITIONALITY CORRUPTION COUNTERPART COUNTRY RISK CREDITORS DEBT DEBT POLICY DEBT SERVICE DEMOCRACIES DEMOCRACY DEMOCRATIC INSTITUTIONS DEREGULATION DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT POLICIES DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DIMINISHING RETURNS DISBURSEMENT DISBURSEMENTS DUMMY VARIABLE ECONOMETRICS ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC RISK ECONOMIC SYSTEMS ECONOMICS ECONOMIES OF SCALE EMPLOYMENT ENFORCEABILITY ENVIRONMENTAL POLICIES EQUATIONS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL SECTOR FINANCIAL SUPPORT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL POLICY FOREIGN AID FUNCTIONAL FORMS FUTURE RESEARCH GDP GDP PER CAPITA GOVERNMENT DEBT GOVERNMENT POLICIES GOVERNMENT SPENDING GROWTH MODELS HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES INCOME INCOME GROWTH INCOME LEVEL INFLATION INFLATION RATE INTERNATIONAL BANK INTERNATIONAL COURT INTERNATIONAL ECONOMICS INVESTIGATION INVESTING LENDERS LENDING DECISIONS LENDING INSTRUMENT LENDING PORTFOLIO LENDING PROGRAMS LENDING VOLUME LOAN LOAN AGREEMENT MACROECONOMIC ADJUSTMENT MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MARKET REFORM MONETARY POLICY OPEN MARKETS PER CAPITA INCOME POLITICAL ECONOMY POLITICAL LEADERS PRIVATE DEBT PRIVATE INVESTMENT PUBLIC SERVICES REAL GDP REGRESSION ANALYSIS REVENUE MOBILIZATION RULE OF LAW SAL SCALE EFFECTS SECURE PROPERTY RIGHTS STRUCTURAL ADJUSTMENT TOTAL DEBT TRADE POLICY TRANCHES TRANSPARENCY TRANSPORT URBAN DEVELOPMENT WORLD BANK LENDING WORLD BANK LOAN WORLD BANK LOANS 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 based on earlier loans are consistent with claims by the World Bank that it has learned from its mistakes with traditional adjustment lending. 2014-06-25T20:19:06Z 2014-06-25T20:19:06Z 2014-06 http://documents.worldbank.org/curated/en/2014/06/19680397/world-bank-lending-quality-economic-policy http://hdl.handle.net/10986/18754 English en_US Policy Research Working Paper;No. 6924 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTABILITY ADJUSTMENT LOANS ADVERSE EFFECTS AGRICULTURE AIC AUDITS BALANCE OF PAYMENTS BANK POLICY BASE YEAR BEST PRACTICE BOND BORROWING BORROWING COUNTRIES BUDGET DEFICITS BUSINESS CYCLE CHECKS COMMITMENT COMMITMENTS COMPARATIVE ECONOMICS CONDITIONALITY CORRUPTION COUNTERPART COUNTRY RISK CREDITORS DEBT DEBT POLICY DEBT SERVICE DEMOCRACIES DEMOCRACY DEMOCRATIC INSTITUTIONS DEREGULATION DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT POLICIES DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DIMINISHING RETURNS DISBURSEMENT DISBURSEMENTS DUMMY VARIABLE ECONOMETRICS ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC RISK ECONOMIC SYSTEMS ECONOMICS ECONOMIES OF SCALE EMPLOYMENT ENFORCEABILITY ENVIRONMENTAL POLICIES EQUATIONS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL SECTOR FINANCIAL SUPPORT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL POLICY FOREIGN AID FUNCTIONAL FORMS FUTURE RESEARCH GDP GDP PER CAPITA GOVERNMENT DEBT GOVERNMENT POLICIES GOVERNMENT SPENDING GROWTH MODELS HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES INCOME INCOME GROWTH INCOME LEVEL INFLATION INFLATION RATE INTERNATIONAL BANK INTERNATIONAL COURT INTERNATIONAL ECONOMICS INVESTIGATION INVESTING LENDERS LENDING DECISIONS LENDING INSTRUMENT LENDING PORTFOLIO LENDING PROGRAMS LENDING VOLUME LOAN LOAN AGREEMENT MACROECONOMIC ADJUSTMENT MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MARKET REFORM MONETARY POLICY OPEN MARKETS PER CAPITA INCOME POLITICAL ECONOMY POLITICAL LEADERS PRIVATE DEBT PRIVATE INVESTMENT PUBLIC SERVICES REAL GDP REGRESSION ANALYSIS REVENUE MOBILIZATION RULE OF LAW SAL SCALE EFFECTS SECURE PROPERTY RIGHTS STRUCTURAL ADJUSTMENT TOTAL DEBT TRADE POLICY TRANCHES TRANSPARENCY TRANSPORT URBAN DEVELOPMENT WORLD BANK LENDING WORLD BANK LOAN WORLD BANK LOANS
spellingShingle	ACCOUNTABILITY ADJUSTMENT LOANS ADVERSE EFFECTS AGRICULTURE AIC AUDITS BALANCE OF PAYMENTS BANK POLICY BASE YEAR BEST PRACTICE BOND BORROWING BORROWING COUNTRIES BUDGET DEFICITS BUSINESS CYCLE CHECKS COMMITMENT COMMITMENTS COMPARATIVE ECONOMICS CONDITIONALITY CORRUPTION COUNTERPART COUNTRY RISK CREDITORS DEBT DEBT POLICY DEBT SERVICE DEMOCRACIES DEMOCRACY DEMOCRATIC INSTITUTIONS DEREGULATION DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT POLICIES DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DIMINISHING RETURNS DISBURSEMENT DISBURSEMENTS DUMMY VARIABLE ECONOMETRICS ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC RISK ECONOMIC SYSTEMS ECONOMICS ECONOMIES OF SCALE EMPLOYMENT ENFORCEABILITY ENVIRONMENTAL POLICIES EQUATIONS FINANCIAL FLOWS FINANCIAL MANAGEMENT FINANCIAL SECTOR FINANCIAL SUPPORT FISCAL DEFICITS FISCAL DISCIPLINE FISCAL POLICY FOREIGN AID FUNCTIONAL FORMS FUTURE RESEARCH GDP GDP PER CAPITA GOVERNMENT DEBT GOVERNMENT POLICIES GOVERNMENT SPENDING GROWTH MODELS HUMAN CAPITAL HUMAN DEVELOPMENT HUMAN RESOURCES INCOME INCOME GROWTH INCOME LEVEL INFLATION INFLATION RATE INTERNATIONAL BANK INTERNATIONAL COURT INTERNATIONAL ECONOMICS INVESTIGATION INVESTING LENDERS LENDING DECISIONS LENDING INSTRUMENT LENDING PORTFOLIO LENDING PROGRAMS LENDING VOLUME LOAN LOAN AGREEMENT MACROECONOMIC ADJUSTMENT MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MARKET REFORM MONETARY POLICY OPEN MARKETS PER CAPITA INCOME POLITICAL ECONOMY POLITICAL LEADERS PRIVATE DEBT PRIVATE INVESTMENT PUBLIC SERVICES REAL GDP REGRESSION ANALYSIS REVENUE MOBILIZATION RULE OF LAW SAL SCALE EFFECTS SECURE PROPERTY RIGHTS STRUCTURAL ADJUSTMENT TOTAL DEBT TRADE POLICY TRANCHES TRANSPARENCY TRANSPORT URBAN DEVELOPMENT WORLD BANK LENDING WORLD BANK LOAN WORLD BANK LOANS Smets, Lodewijk Knack, Stephen World Bank Lending and the Quality of Economic Policy
relation	Policy Research Working Paper;No. 6924
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 based on earlier loans are consistent with claims by the World Bank that it has learned from its mistakes with traditional adjustment lending.
format	Publications & Research :: Policy Research Working Paper
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	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/06/19680397/world-bank-lending-quality-economic-policy http://hdl.handle.net/10986/18754
_version_	1764442747333246976

World Bank Lending and the Quality of Economic Policy

Similar Items