Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?

Bobba, Matteo; Powell, Andrew

doi:10.2139/ssrn.1820070

Cited by 20 publications

(23 citation statements)

References 19 publications

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“…Natural disasters also pose a modest threat to fiscal stability compared with the looming burden of social insurance policies in many countries with ageing populations and rapidly rising healthcare costs. Less-developed countries may also be concerned that budgeting for disasters might diminish the willingness of the international community to provide recovery assistance (Bobba and Powell, 2006;cited in Borensztein, Cavallo and Valenzuela, 2008).…”

Section: Why Governments Might Choose Not To Budget For Disastersmentioning

confidence: 99%

Budgeting for disasters

Phaup¹,

Kirschner²

2010

OECD Journal on Budgeting

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Some ways of budgeting for disasters have the potential to increase welfare by increasing national savings, reducing exposure to risk and promoting mitigation prior to a loss. Those ways can also contribute to aggregate fiscal stability over the long term. The power of budgeting, however, can be misdirected to increase losses and lead to fiscal instability. This paper describes the potential for gain from alternative budgetary treatments of policies aimed at reducing the effects on consumption of random shocks to income and wealth. It identifies a critical difference between alternatives: budgetary recognition of expected costs of relief and recovery before the loss event. We classify those different methods as ex ante and ex post budgeting. We also consider some budgetary mechanisms that can promote effective recognition and constrain opportunistic behaviour by elected officials. Finally, this paper describes related budgetary practices in some OECD countries. Many have instituted policies consistent with ex ante budgeting, but we have insufficient information to determine their effectiveness.

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Section: Why Governments Might Choose Not To Budget For Disastersmentioning

confidence: 99%

Budgeting for disasters

Phaup¹,

Kirschner²

2010

OECD Journal on Budgeting

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“…Perhaps surprisingly, the available data does not support that conjecture. As mentioned above, Bobba and Powell (2006), using a large panel dataset, find no evidence that natural disasters affect the pattern of bilateral and multilateral aid flows. This means that there is no evidence that aid is an appropriate substitute for insurance.…”

Section: The Dark Side Of Insurancementioning

confidence: 86%

“…Interestingly, this aid shortfall does not appear to be a unique feature of the case of Belize. Bobba and Powell (2006), using a large panel dataset, find no evidence that natural disasters affect the pattern of bilateral and multilateral aid flows. In other words, controlling for other determinants of aid, the occurrence of natural disasters does not have a statistically significant effect of increasing international aid.…”

Section: Debt Dynamics and Catastrophic Risk: The Case Of Belizementioning

confidence: 94%

Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance

Cavallo

Borensztein²,

Valenzuela³

2008

IMF Working Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res. 3 Abstract 1Natural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has the lowest levels of insurance coverage. This paper examines the vulnerability of Belize's public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belize's debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year. International organizations can play a role in assisting countries to overcome distortions in insurance markets, as well as in helping to relax internal political resistance to the purchase of insurance policies.JEL classification: H30; G15; G22; Q54

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“…In the latter case, the non-borrowing country gains scale in its lending (through the leverage of the MDB) and may gain technical expertise and diversify its own risks. 8 Bobba and Powell (2006) argue in favor of this trade-off and present empirical results to illustrate the inferred preferences of non-borrowing countries given the pattern of their bilateral aid. Bobba and Powell (2007) show that politics (proxied by the voting correlations at the United Nations) does play a role in the cross-country distribution of bilateral aid and using this as an instrument show aid extended to countries with the closest alignments in voting patterns tends to be less effective.…”

Section: Mdb Credit Statusmentioning

confidence: 89%

Multilateral Development Bank Ratings and Preferred Creditor Status

Perraudin¹,

Powell²,

Yang³

2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license. This paper analyzes influences on the credit standing of Multilateral Development Banks (MDBs). We focus on the quality, diversification and single name concentration of their portfolios, and on the market practice known as Preferred Creditor Status (PCS). PCS refers to the fact that sovereigns which default on other debt rarely fail to meet their obligations to MDBs. The paper examines how rating agencies assess MDB ratings, looking, in particular, at how Standard & Poor's (S&P) evaluates capital adequacy. We benchmark the agency's approach against an industry-standard, ratings-based Credit Risk Model (CRM). We implement the approaches for a specific MDB: the Inter-American Development Bank (IDB).The paper shows that S&P's approach is highly conservative in its treatment of single name concentration risk and makes insufficient allowance for PCS. Calibrating the CRM with risk-neutral distributions, we examine the effect of PCS on MDB funding spreads. Executive SummaryMultilateral Development Banks (MDBs) play an important role in international financial markets, raising money by issuing bonds and lending to their borrowing member countries.In so doing, they benefit from a market practice known as Preferred Creditor Status (PCS). PCS refers to the fact that sovereign borrowers typically continue to service their loans from MDBs even in the unlikely event that they default on other claims. This confers on the loans of MDBs a type of de facto seniority.The business model followed by MDBs requires that they maintain a high credit standing.For this reason, their assessment ...

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Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?

Cited by 20 publications

References 19 publications

Budgeting for disasters

Budgeting for disasters

Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance

Multilateral Development Bank Ratings and Preferred Creditor Status

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