Project Finance as a Driver of Economic Growth in Low-Income Countries
45 Pages Posted: 11 Feb 2009
Date Written: February 11, 2009
This study investigates the role of project finance as a driver of economic growth. We hypothesize that project finance is beneficial to the least developed economies as it compensates for any lack of domestic financial development. The contractual structure unique to project finance should lead to better investment management and governance. Investigating 90 countries from 1991 to 2005, we find support for our hypothesis. Project finance indeed fosters economic growth and this effect is strongest in low-income countries, where financial development and governance is weak.
Keywords: project finance, economic growth, economic development, financial development, developing countries
JEL Classification: F43, G15, G21, O16
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