I rely on commitment and disbursement transactions on loans extended by official creditors to developing countries, as recorded in the DRS database. Official creditors include a range of multilateral lenders such as the World Bank, the African Development Bank, the Asian Development Bank, and the European Investment Bank. My dataset also includes loans issued by bilateral official creditors. The majority of these are major OECD aid donors such as Japan, Germany and the United States, but the dataset also includes a number of non-OECD creditors such as Kuwait, Saudi Arabia, Russia, and the former Soviet Union (in the earlier half of my sample).<sup>9</sup> The dataset, retrieved from DRS in January 2012, contains 60,192 loans issued by 188 distinct creditor countries and organizations. A large number of creditors represented in DRS account for only a handful of loans each, and usually for very small amounts. I discard a total of 768 loans issued by 113 creditors who have fewer than 50 loans each in the DRS data (and on average fewer than seven loans each), leaving a total of 59,424 loans issued by 75 distinct major official creditors. Loan commitments are reported in the currency of origination of the loan, and subsequent disbursements are recorded in DRS in current US dollars. I discard a further 36 loans for which data on the exchange rate used to convert the disbursements denominated in the currency of origination into US dollar could not be retrieved from DRS. This reduces the sample further to 59,388 loans.

The first step in the development of my instrument is to construct a disbursement profile for each loan, i.e. the fraction of the original loan commitment that is disbursed in the commitment year and each subsequent year. I calculate these by converting the US dollar disbursements on each loan back to the currency of denomination of the original commitment, using the corresponding disbursement-year exchange rates, and then express this as a fraction of the original commitment. Roughly 10 percent of loans have accumulated disbursements greater than initial commitments. This typically reflects increases in the loan amount that occur at some point during the disbursement period, but that are not recorded in the original commitment. Because these revisions in loan size are potentially endogenous responses to contemporaneous shocks, I use only the original commitment and

> 9 Lending by official creditors to governments is formally defined follows _" Public and publicly guaranteed debt from official creditors includes loans from international organizations (multilateral loans) and loans from governments (bilateral loans).  Loans from international organization include loans and credits from the World Bank, regional development banks, and other multilateral and intergovernmental agencies. Excluded are loans from funds administered by an international organization on behalf of a single donor government; these are classified as loans from governments. Government loans include loans from governments and their agencies (including central banks), loans from autonomous bodies, and direct loans from official export credit agencies."_ (data.worldbank.org). From this total, I exclude IMF credits, as these typically take the form of budget support as opposed to financing specific projects, and typically also are approved for strongly cyclical reasons, i.e. in response to macroeconomic crises in the borrowing countries.

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