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Debt Relief and Adjustment Incentives

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  • W. Max Corden

    (International Monetary Fund)

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    Abstract

    The argument that debt relief would increase the incentive of a debtor country to make an adjustment effort (to invest) and that for this reason creditors may benefit by granting relief is analyzed in this paper. It is shown that there are actually opposing incentive effects of debt relief and that the argument could be valid in particular circumstances. A distinction is made between exogenous and endogenous relief, the latter compelled by low capacity to pay caused by low investment earlier.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 35 (1988)
    Issue (Month): 4 (December)
    Pages: 628-643

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    Handle: RePEc:pal:imfstp:v:35:y:1988:i:4:p:628-643

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    Cited by:
    1. Bert Hofman & Helmut Reisen, 1990. "Debt Overhang, Liquidity Constraints and Adjustment Incentives," OECD Development Centre Working Papers 32, OECD Publishing.
    2. Siebert, Horst, 1991. "Wege aus der Verschuldungskrise," Open Access Publications from Kiel Institute for the World Economy, Kiel Institute for the World Economy (IfW) 2011, Kiel Institute for the World Economy (IfW).
    3. Siebert, Horst, 1990. "Wege aus der Verschuldungskrise," Kiel Working Papers 435, Kiel Institute for the World Economy.
    4. Johansson, Pernilla, 2010. "Debt Relief, Investment and Growth," World Development, Elsevier, Elsevier, vol. 38(9), pages 1204-1216, September.
    5. Idlemouden, Khadija & Raffinot, Marc, 2005. "Le fardeau virtuel de la dette extérieure. Une revue de la littérature à l'aune de l'initiative « pays pauvres très endettés » (PPTE)," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/4089, Paris Dauphine University.
    6. Joshua Aizenman & Eduardo R. Borensztein, 1989. "Strategic Investment in a Debt Bargaining Framework," NBER Working Papers 3019, National Bureau of Economic Research, Inc.
    7. Berthelemy, Jean-Claude, 2001. "HIPC Debt Relief and Policy Reform Incentives," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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