The Catalytic Effect of Lending by the International Financial Institutions

The catalyzing role of policy-based lending by the IMF and the World Bank: fact or fiction?

“…As noted in the Introduction, the two most focused published studies on the catalytic eect to date are Rodrik (1996), and Bird and Rowlands (1997). Rodrik ®nds that multilateral lending is negatively but not signi®cantly associated with future period private capital¯ows.…”

“…Thus while other multilaterals have a negative eect on subsequent private¯ows, particularly bank lending, the IMF's catalytic eect appears to be positive. Bird and Rowlands (1997) search for a catalytic eect disaggregating the data in various ways. Although they ®nd limited evidence for IMF catalysis on public¯ows, they conclude that their`estimations do not generally support the notion of a positive catalytic eect'.…”

“…The behaviour of ocial bilateral¯ows, on the other hand, was consistent with more altruistic motivations. While the details of these estimations are presented in Bird and Rowlands (1997;, the basic conclusion is that it is important to control for economic characteristics in any examination of the catalytic eect.…”

“…Perhaps the best known and frequently cited analysis of multilateral lending is that by Rodrik (1996), although other studies which have a bearing on the catalytic eect are reviewed in Bird and Rowlands (1997), which also provides additional new evidence. However, even Rodrik's research exhibits some shortcomings.…”

“…However, since in essence the paper is a summary of the project, a considerable amount of signi®cant detail has been omitted to ensure that its length does not become unmanageable. For those who want to pursue some of the issues raised here in more detail this paper should therefore be read in conjunction with the other papers that have arisen from the project (Bird and Rowlands, 1997;Bird, 1998;. 3 The layout of the paper is as follows.…”