Development Centre Studies

OECD Development Centre

1990-0295 (online)
1563-4302 (print)
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This series of monographs from the OECD Development Centre covers development issues generally and in some cases issues in specific countries. It  includes Angus Maddison’s books containing long-term historical estimates of GDP for various areas of the world.

Also available in French, Spanish
Guaranteeing Development? The Impact of Financial Guarantees

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OECD Development Centre

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James Winpenny
18 Oct 2005
9789264013315 (PDF) ;9789264013018(print)

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This volume tests the relevance and usefulness of guarantees to public and private actors in developing countries, especially for funding development projects. Not to be confused with export credit guarantees usually accorded to nationals with the aim of stimulating exports and overseas investment, development guarantees are destined for actors in emerging or developing economies where risk is a deterrent to lending or investment.

The presence of guarantees from multilateral or bilateral agencies can encourage financial flows either to increase or to go where they otherwise might not. In this way, they can have a positive effect on sovereign ratings as well as their immediate direct effect on the local development environment. As a bonus, this study finds, development guarantees can help stimulate and stabilise local capital markets, thus providing future benefits for both public and private investors.

"A timely book, throwing urgently-needed light on this little-understood topic, which could be a vital key to economic progress in developing countries. With my deep congratulations to the author."

--Michel Camdessus, Honorary Governor of the Banque de France,
formerly Managing Director of the International Monetary Fund)

Also available in French
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Table of Contents

Chapter 1. What the Study Aims to Do, and Why
-Overview: Aims and Scope
-Growth of Concerns about Investment Risks
-Water - An Obstinate Case
Chapter 2. The Case for Guarantees
-Risk Sharing in Infrastructure
-The Sub-Sovereign Issue
-Types of Guarantees
-Matching Risks with Instruments - A Summary
-The Main Sources of Development Guarantees in Perspective
Chapter 3. Costs and Potential Distortions of Guarantees
-Costs to Donors and Guarantors
-Costs to Recipients and Host Countries
-Theoretical Objections
Chapter 4. The Development Impact of Guarantees
-The Development Agenda
-Market and Policy Failures
-Distorted Financial and Capital Markets
-Guarantees and Capital Market Reform: Mexico, India, and South Africa
-Impact on the Quality of Investments
-Quantitative Impact
-Making the Products More Relevant
-Different Development Contexts
-Magnifying the Impact of Guarantees
Chapter 5. Conclusions, Questions, and Loose Ends
-Meaning of "Development Guarantees"
-Changing Motives
-Measurement Problems
-Relative Size
-Constraints to their Wider Use
-Market Niche, or Unfair Competition?
-Comfort, Prop, or Stimulus?
-The Power of the Credit Ratings Agency
-Distortions of Correctives?
-Relevance to Poorer Countries
-Local Currency Guarantees
-Opportunities for Leverage

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