Record: oai:ARNO:630653

AuteurW. van Proosdij
TitelThe political economy of banking crises and aid disbursements : a LSDV and PVAR approach
BegeleidersS.J.G. van Wijnbergen, W.E. Romp
FaculteitFaculteit Economie en Bedrijfskunde
OpleidingFEB MSc Economics
SamenvattingThis study analyses the effects of banking crises on the amount of aid supplied by donors, using both a Least Squares Dummy Variable (LSDV) and a Panel Vector Autoregression (PVAR) approach. We estimate how banking crises in donor countries negatively affect their
aid disbursements, using panel data from 24 countries between 1960 and 2014. We find that banking crises in donor countries cause substantial falls in aid flows, between 15 and 40 per cent relative to the counterfactual. The negative effects of a crisis last until around twelve years after the onset of the crisis, while the amount of aid is only restored relative to the counterfactual after more than twenty years. We argue that fiscal costs are the main driver
behind these negative effects. Furthermore, our results imply that the global financial crisis so far has a larger negative effect on aid than previous crises had. In addition, we find no support that the political ideology of a donor’s government affects aid supply, that donors protect social and humanitarian aid, and that donors protect aid to the poorest of countries during a banking crisis, in contrast to most of the literature. Our findings are robust to
changes in sample, period, and the addition of political and macroeconomic variables.
Soort document scriptie master