Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors

This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for public spending that can be used to estimate government spending multipliers. Loans from official cre...

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Main Author:	Kraay, Aart
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	BANK BORROWERS BANK FINANCING BANK LENDING BANK LOAN BIASES BILATERAL DISBURSEMENTS BORROWER BUSINESS CYCLE CAPITAL MOBILITY CENTRAL BANKS CHECKS CONSUMPTION EXPENDITURES CREDIT AGENCIES CREDIT LINES CREDITOR CREDITORS CREDITS DEBT DEBT DATA DEBT OBLIGATIONS DEBTOR DEBTOR REPORTING SYSTEM DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT BANKS DIRECT LOANS DISBURSEMENT DISBURSEMENTS DOMESTIC DEBT DUMMY VARIABLE ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC POLICY EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS EXCHANGE RATE ARRANGEMENTS EXCHANGE RATES EXCLUSION EXTERNAL DEBT FACE VALUE FINANCIAL ASSISTANCE FINANCIAL CRISIS FINANCIAL OPENNESS FINANCIAL SUPPORT FISCAL POLICY FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATE FUTURE LOANS GLOBAL DEVELOPMENT FINANCE GLOBAL ECONOMY GOVERNMENT EXPENDITURE GOVERNMENT FINANCE GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROUPS OF LOANS HOUSEHOLDS INDIVIDUAL LOANS INFRASTRUCTURE INVESTMENT INITIAL LOAN INSTITUTIONAL ENVIRONMENT INSTRUMENT INTEREST EXPENDITURES INTEREST PAYMENTS INTEREST RATE INTERNATIONAL BANK INTERNATIONAL BORROWING INTERNATIONAL DEVELOPMENT INTERNATIONAL TRADE INVESTING INVESTMENT BANK LARGE NUMBER OF CREDITORS LENDERS LOAN LOAN AGREEMENTS LOAN AMOUNT LOAN APPROVAL LOAN APPROVALS LOAN COMMITMENT LOAN COMMITMENTS LOAN SIZE LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MAJOR CREDITORS MARKET ECONOMIES MARKET INTEREST RATES MATURITY MAXIMUM LOAN AMOUNT MONETARY FUND MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTER NATURAL DISASTERS NEGATIVE SHOCKS NOMINAL INTEREST RATE PENSION PENSION FUND POLICY RESPONSE POLITICAL ECONOMY PRIVATE CREDITORS PROCUREMENT PROVISIONS PUBLIC PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR REFORM PUBLIC SPENDING RECESSION RECESSIONS RECIPIENT COUNTRIES RECIPIENT COUNTRY REINVESTMENT REPAYMENT REPAYMENT PERIODS REPAYMENTS RETURN ROADS SOVEREIGN DEBT STOCK RETURNS T-BILL T-BILL RATE T-BILLS TAX TAX OBLIGATIONS TREASURY TREASURY BILL TREASURY BILL RATE TREASURY BILL RATES UNION WEALTH EFFECT WEALTH EFFECTS
Online Access:	http://documents.worldbank.org/curated/en/2012/06/16398361/government-spending-multipliers-developing-countries-evidence-lending-official-creditors http://hdl.handle.net/10986/9311

id	okr-10986-9311
recordtype	oai_dc
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	BANK BORROWERS BANK FINANCING BANK LENDING BANK LOAN BIASES BILATERAL DISBURSEMENTS BORROWER BUSINESS CYCLE CAPITAL MOBILITY CENTRAL BANKS CHECKS CONSUMPTION EXPENDITURES CREDIT AGENCIES CREDIT LINES CREDITOR CREDITORS CREDITS DEBT DEBT DATA DEBT OBLIGATIONS DEBTOR DEBTOR REPORTING SYSTEM DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT BANKS DIRECT LOANS DISBURSEMENT DISBURSEMENTS DOMESTIC DEBT DUMMY VARIABLE ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC POLICY EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS EXCHANGE RATE ARRANGEMENTS EXCHANGE RATES EXCLUSION EXTERNAL DEBT FACE VALUE FINANCIAL ASSISTANCE FINANCIAL CRISIS FINANCIAL OPENNESS FINANCIAL SUPPORT FISCAL POLICY FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATE FUTURE LOANS GLOBAL DEVELOPMENT FINANCE GLOBAL ECONOMY GOVERNMENT EXPENDITURE GOVERNMENT FINANCE GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROUPS OF LOANS HOUSEHOLDS INDIVIDUAL LOANS INFRASTRUCTURE INVESTMENT INITIAL LOAN INSTITUTIONAL ENVIRONMENT INSTRUMENT INTEREST EXPENDITURES INTEREST PAYMENTS INTEREST RATE INTERNATIONAL BANK INTERNATIONAL BORROWING INTERNATIONAL DEVELOPMENT INTERNATIONAL TRADE INVESTING INVESTMENT BANK LARGE NUMBER OF CREDITORS LENDERS LOAN LOAN AGREEMENTS LOAN AMOUNT LOAN APPROVAL LOAN APPROVALS LOAN COMMITMENT LOAN COMMITMENTS LOAN SIZE LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MAJOR CREDITORS MARKET ECONOMIES MARKET INTEREST RATES MATURITY MAXIMUM LOAN AMOUNT MONETARY FUND MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTER NATURAL DISASTERS NEGATIVE SHOCKS NOMINAL INTEREST RATE PENSION PENSION FUND POLICY RESPONSE POLITICAL ECONOMY PRIVATE CREDITORS PROCUREMENT PROVISIONS PUBLIC PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR REFORM PUBLIC SPENDING RECESSION RECESSIONS RECIPIENT COUNTRIES RECIPIENT COUNTRY REINVESTMENT REPAYMENT REPAYMENT PERIODS REPAYMENTS RETURN ROADS SOVEREIGN DEBT STOCK RETURNS T-BILL T-BILL RATE T-BILLS TAX TAX OBLIGATIONS TREASURY TREASURY BILL TREASURY BILL RATE TREASURY BILL RATES UNION WEALTH EFFECT WEALTH EFFECTS
spellingShingle	BANK BORROWERS BANK FINANCING BANK LENDING BANK LOAN BIASES BILATERAL DISBURSEMENTS BORROWER BUSINESS CYCLE CAPITAL MOBILITY CENTRAL BANKS CHECKS CONSUMPTION EXPENDITURES CREDIT AGENCIES CREDIT LINES CREDITOR CREDITORS CREDITS DEBT DEBT DATA DEBT OBLIGATIONS DEBTOR DEBTOR REPORTING SYSTEM DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT BANKS DIRECT LOANS DISBURSEMENT DISBURSEMENTS DOMESTIC DEBT DUMMY VARIABLE ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC POLICY EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS EXCHANGE RATE ARRANGEMENTS EXCHANGE RATES EXCLUSION EXTERNAL DEBT FACE VALUE FINANCIAL ASSISTANCE FINANCIAL CRISIS FINANCIAL OPENNESS FINANCIAL SUPPORT FISCAL POLICY FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATE FUTURE LOANS GLOBAL DEVELOPMENT FINANCE GLOBAL ECONOMY GOVERNMENT EXPENDITURE GOVERNMENT FINANCE GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROUPS OF LOANS HOUSEHOLDS INDIVIDUAL LOANS INFRASTRUCTURE INVESTMENT INITIAL LOAN INSTITUTIONAL ENVIRONMENT INSTRUMENT INTEREST EXPENDITURES INTEREST PAYMENTS INTEREST RATE INTERNATIONAL BANK INTERNATIONAL BORROWING INTERNATIONAL DEVELOPMENT INTERNATIONAL TRADE INVESTING INVESTMENT BANK LARGE NUMBER OF CREDITORS LENDERS LOAN LOAN AGREEMENTS LOAN AMOUNT LOAN APPROVAL LOAN APPROVALS LOAN COMMITMENT LOAN COMMITMENTS LOAN SIZE LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MAJOR CREDITORS MARKET ECONOMIES MARKET INTEREST RATES MATURITY MAXIMUM LOAN AMOUNT MONETARY FUND MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTER NATURAL DISASTERS NEGATIVE SHOCKS NOMINAL INTEREST RATE PENSION PENSION FUND POLICY RESPONSE POLITICAL ECONOMY PRIVATE CREDITORS PROCUREMENT PROVISIONS PUBLIC PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR REFORM PUBLIC SPENDING RECESSION RECESSIONS RECIPIENT COUNTRIES RECIPIENT COUNTRY REINVESTMENT REPAYMENT REPAYMENT PERIODS REPAYMENTS RETURN ROADS SOVEREIGN DEBT STOCK RETURNS T-BILL T-BILL RATE T-BILLS TAX TAX OBLIGATIONS TREASURY TREASURY BILL TREASURY BILL RATE TREASURY BILL RATES UNION WEALTH EFFECT WEALTH EFFECTS Kraay, Aart Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
relation	Policy Research Working Paper; No. 6099
description	This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for public spending that can be used to estimate government spending multipliers. Loans from official creditors (primarily multilateral development banks and bilateral aid agencies) are a major source of financing for government spending in developing countries. These loans typically finance public spending projects that take several years to implement, with multiple disbursements linked to the stages of project implementation. The long disbursement periods for these loans imply that the bulk of government spending financed by official creditors in a given year reflects loan approval decisions made in many previous years, before current-year macroeconomic shocks are known. Loan-level commitment and disbursement transactions from the World Bank's Debtor Reporting System database are used to isolate a predetermined component of government spending associated with past loan approvals. This can be used as an instrument to estimate spending multipliers for a large sample of 102 developing countries. The one-year government spending multiplier is reasonably-precisely estimated to be around 0.4, and there is some suggestive evidence that multipliers are larger in recessions, in countries less exposed to international trade, and in countries with flexible exchange rate regimes.
format	Publications & Research :: Policy Research Working Paper
author	Kraay, Aart
author_facet	Kraay, Aart
author_sort	Kraay, Aart
title	Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
title_short	Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
title_full	Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
title_fullStr	Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
title_full_unstemmed	Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors
title_sort	government spending multipliers in developing countries : evidence from lending by official creditors
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2012/06/16398361/government-spending-multipliers-developing-countries-evidence-lending-official-creditors http://hdl.handle.net/10986/9311
_version_	1764409285024940032
spelling	okr-10986-93112021-04-23T14:02:45Z Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors Kraay, Aart BANK BORROWERS BANK FINANCING BANK LENDING BANK LOAN BIASES BILATERAL DISBURSEMENTS BORROWER BUSINESS CYCLE CAPITAL MOBILITY CENTRAL BANKS CHECKS CONSUMPTION EXPENDITURES CREDIT AGENCIES CREDIT LINES CREDITOR CREDITORS CREDITS DEBT DEBT DATA DEBT OBLIGATIONS DEBTOR DEBTOR REPORTING SYSTEM DEPENDENT DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT BANKS DIRECT LOANS DISBURSEMENT DISBURSEMENTS DOMESTIC DEBT DUMMY VARIABLE ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC POLICY EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS EXCHANGE RATE ARRANGEMENTS EXCHANGE RATES EXCLUSION EXTERNAL DEBT FACE VALUE FINANCIAL ASSISTANCE FINANCIAL CRISIS FINANCIAL OPENNESS FINANCIAL SUPPORT FISCAL POLICY FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATE FUTURE LOANS GLOBAL DEVELOPMENT FINANCE GLOBAL ECONOMY GOVERNMENT EXPENDITURE GOVERNMENT FINANCE GOVERNMENT INVESTMENT GOVERNMENT SPENDING GRACE PERIOD GROUPS OF LOANS HOUSEHOLDS INDIVIDUAL LOANS INFRASTRUCTURE INVESTMENT INITIAL LOAN INSTITUTIONAL ENVIRONMENT INSTRUMENT INTEREST EXPENDITURES INTEREST PAYMENTS INTEREST RATE INTERNATIONAL BANK INTERNATIONAL BORROWING INTERNATIONAL DEVELOPMENT INTERNATIONAL TRADE INVESTING INVESTMENT BANK LARGE NUMBER OF CREDITORS LENDERS LOAN LOAN AGREEMENTS LOAN AMOUNT LOAN APPROVAL LOAN APPROVALS LOAN COMMITMENT LOAN COMMITMENTS LOAN SIZE LOCAL CURRENCY MACROECONOMIC CONDITIONS MACROECONOMIC CRISES MAJOR CREDITORS MARKET ECONOMIES MARKET INTEREST RATES MATURITY MAXIMUM LOAN AMOUNT MONETARY FUND MONETARY POLICY MULTILATERAL LENDERS NATURAL DISASTER NATURAL DISASTERS NEGATIVE SHOCKS NOMINAL INTEREST RATE PENSION PENSION FUND POLICY RESPONSE POLITICAL ECONOMY PRIVATE CREDITORS PROCUREMENT PROVISIONS PUBLIC PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SECTOR REFORM PUBLIC SPENDING RECESSION RECESSIONS RECIPIENT COUNTRIES RECIPIENT COUNTRY REINVESTMENT REPAYMENT REPAYMENT PERIODS REPAYMENTS RETURN ROADS SOVEREIGN DEBT STOCK RETURNS T-BILL T-BILL RATE T-BILLS TAX TAX OBLIGATIONS TREASURY TREASURY BILL TREASURY BILL RATE TREASURY BILL RATES UNION WEALTH EFFECT WEALTH EFFECTS This paper uses a novel loan-level dataset covering lending by official creditors to developing country governments to construct an instrument for public spending that can be used to estimate government spending multipliers. Loans from official creditors (primarily multilateral development banks and bilateral aid agencies) are a major source of financing for government spending in developing countries. These loans typically finance public spending projects that take several years to implement, with multiple disbursements linked to the stages of project implementation. The long disbursement periods for these loans imply that the bulk of government spending financed by official creditors in a given year reflects loan approval decisions made in many previous years, before current-year macroeconomic shocks are known. Loan-level commitment and disbursement transactions from the World Bank's Debtor Reporting System database are used to isolate a predetermined component of government spending associated with past loan approvals. This can be used as an instrument to estimate spending multipliers for a large sample of 102 developing countries. The one-year government spending multiplier is reasonably-precisely estimated to be around 0.4, and there is some suggestive evidence that multipliers are larger in recessions, in countries less exposed to international trade, and in countries with flexible exchange rate regimes. 2012-06-29T18:49:25Z 2012-06-29T18:49:25Z 2012-06 http://documents.worldbank.org/curated/en/2012/06/16398361/government-spending-multipliers-developing-countries-evidence-lending-official-creditors http://hdl.handle.net/10986/9311 English en_US Policy Research Working Paper; No. 6099 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research

Government Spending Multipliers in Developing Countries : Evidence from Lending by Official Creditors

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