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Debt Relief, Investment and Growth

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  • Johansson, Pernilla
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    Abstract

    Summary From 1989 to 2004 the donor community provided approximately $400 billion in debt relief to developing countries in an attempt to promote growth and reduce poverty. Using a sample of 118 developing countries, this paper empirically assesses the impact of debt relief on growth via (1) resources made available for investment from reduced debt service payments and (2) improved incentives to invest from a reduced debt stock. Although the results show no general evidence of a growth effect from debt relief, the study provides certain evidence that it promotes investment and thereby growth in countries not classified as HIPCs.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 38 (2010)
    Issue (Month): 9 (September)
    Pages: 1204-1216

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    Handle: RePEc:eee:wdevel:v:38:y:2010:i:9:p:1204-1216

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    Web page: http://www.elsevier.com/locate/worlddev

    Related research

    Keywords: debt relief growth investment developing countries HIPC;

    References

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    Cited by:
    1. Bjørnskov, Christian & Schröder, Philipp J.H., 2010. "Are Debt Repayment Incentives Undermined by Foreign Aid?," Working Papers 10-20, University of Aarhus, Aarhus School of Business, Department of Economics.
    2. Knoll, Martin, 2013. "The heavily indebted poor countries and the multilateral debt relief initiative: A test case for the validity of the debt overhang hypothesis," Discussion Papers 2013/11, Free University Berlin, School of Business & Economics.
    3. Cordella, Tito & Missaley, Alessandro, 2011. "To give or to forgive ? aid versus debt relief," Policy Research Working Paper Series 5859, The World Bank.

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