chapter  7
Pages 33

The Bank finance variable and the compliance variable also enter each equation with one and two period lags. The rationale behind the use of lags is the belief that the injection of Bank finance into an economy may have multiplier effects on the dependent variables (for example, a multiplier effect on GDP growth rates may come about via the financial flows enabling higher import and investment levels) with the impact of such multiplier effects taking several years to emerge. Likewise, in the case of compliance with Bank policy conditions, many of these conditions relate to reforms designed to influence medium-term supply-side variables such that their effects may take several years to materialise.