Project finance as a driver of economic growth in low-income countries

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 is able to compensate for a lack of domestic financial development. The contractual structure unique to project finance leads t...

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Bibliographic Details
Published in:	Review of financial economics Vol. 19; no. 2; pp. 49 - 59
Main Authors:	Kleimeier, Stefanie, Versteeg, Roald
Format:	Journal Article
Language:	English
Published:	New Orleans Elsevier Inc 01-04-2010 Elsevier Elsevier Science Ltd
Series:	Review of Financial Economics
Subjects:	Developing countries Economic development Economic growth F43 Financial development G15 G21 LDCs Low income groups O16 Project finance Project finance Economic growth Economic development Financial development Developing countries Studies Project finance F43 O16 Economic growth G21 Financial development Developing countries G15 Economic development
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Summary:	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 is able to compensate for a lack of domestic financial development. The contractual structure unique to project finance leads to better investment management and governance. Investigating 90 countries from 1991 to 2005, we find support for our hypothesis. Results show that project finance fosters economic growth and that its effect is strongest in low-income countries, where financial development and governance is weakest.
ISSN:	1058-3300 1873-5924
DOI:	10.1016/j.rfe.2010.01.002