01703cas a2200253 a 4500 AALejournalIMF003142 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451857849 1018-5941 BD-DhAAL BD-DhAAL Ulku, Hulya. Grants Versus Loans / Hulya Ulku, Tito Cordella. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (31 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Under what conditions should grants be preferred to loans? To answer this question, we present a simple model a la Krugman (1988) and show that, for any given level of developmental assistance, the optimal degree of loan concessionality is positively associated with economic growth if countries are poor, have bad policies, and high debt obligations. We then test our model by estimating a modified growth model for a panel of developing countries, and find evidence supporting our predictions. Finally, we assess the determinants of current aid allocations and find that the degree of concessionality is negatively correlated with countries' levels of development. Mode of access: Internet Cordella, Tito. IMF Working Papers; Working Paper ; No. 2004/161 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/161/001.2004.issue-161-en.xml IMF e-Library