Review of World Economics

, Volume 139, Issue 3, pp 507–549

What determines the success or failure of german bilateral financial aid?


DOI: 10.1007/BF02659673

Cite this article as:
Hemmer, HR. & Lorenz, A. Rev. World Econ. (2003) 139: 507. doi:10.1007/BF02659673


This paper explores the causes of success or failure of German bilateral financial aid, using data on 1,003 Financial Cooperation (FC) projects and programs performed by the Kreditanstalt für Wiederaufbau (KfW). The authors find that the success or failure of financial aid loans disbursed under FC depends on project characteristics and macroeconomic conditions in the recipient country. Supervision time is also highly negatively correlated with the probability of success. While the relationship disappears once endogeneity is taken into account, the existence of an institutional bias toward a disproportionate allocation of supervision resources in unsuccessful projects cannot be rejected. These results show that some recent evidence on multilateral policybased aid holds also for the case of German bilateral project-based aid.


Aid evaluation financial cooperation performance supervision 

Copyright information

© Kiel Institute for World Economics 2003

Authors and Affiliations

  1. 1.Kreditanstalt für Wiederaufbau (KfW)Frankfurt/Main
  2. 2.Department of EconomicsJustus-Liebig-University GiessenGiessenGermany

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