Following Public Finances: The Mirage of MDBs Countercyclicality
Peer Reviewed
Date issued
Jan 2020
Subject
Development Bank;
Capital Flow;
Fiscal Policy;
Public Expenditure;
Public Finance;
Public Debt;
Gross Domestic Product
JEL code
F34 - International Lending and Debt Problems;
F53 - International Agreements and Observance • International Organizations;
F44 - International Business Cycles;
F21 - International Investment • Long-Term Capital Movements;
F42 - International Policy Coordination and Transmission
Category
Working Papers
This paper investigates the co-movement of sovereign lending from multilateral development banks (MDBs) and private creditors with government expenditure. The paper finds that multilateral sovereign lending follows government expenditure and that this correlation does not change if governments are running a surplus or a deficit. This finding raises doubts on the feasibility of MDBs to be counter-cyclical, unless the governments themselves implement counter-cyclical fiscal policies.
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