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Policy, vulnerability and the new debt sustainability framework

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  • Benno Ferrarini

    (World Trade Institute, Bern, Switzerland)

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    Abstract

    We investigate the empirical foundations of the New Debt Sustainability Framework (NDSF), which was recently endorsed by the IMF and the World Bank in support of low-income countries' (LICs) debt sustainability. Our empirical re-assessment questions the existence of a probabilistic relationship between the quality of countries' policies and institutions and their risk of debt distress. In contrast, we find that indicators of economic vulnerability are more significant predictors of debt distress among LICs. We argue that the NDSF is bound to distort aid allocation away from the country-specific circumstances which truly matter for the achievement of debt sustainability. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.1508
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 21 (2009)
    Issue (Month): 7 ()
    Pages: 895-914

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    Handle: RePEc:wly:jintdv:v:21:y:2009:i:7:p:895-914

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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    1. Kevin Ross & R. Brooks & Robert Powell & Ydahlia A. Metzgen Quemarez & Doris C. Ross & Mariano Cortes & Saqib Rizavi & Benoit Ketchekmen & Francesca Fornasari, 1998. "External Debt Histories of Ten Low-Income Developing Countries - Lessons from Their Experience," IMF Working Papers 98/72, International Monetary Fund.
    2. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
    3. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 66-92.
    4. Kanbur, Ravi, 2005. "Reforming the Formula: A Modest Proposal for Introducing Development Outcomes in IDA Allocation Procedures," Working Papers 127071, Cornell University, Department of Applied Economics and Management.
    5. Kanbur, Ravi, 2005. "Reforming the Formula: A Modest Proposal for Introducing Development Outcomes in IDA Allocation Procedures," CEPR Discussion Papers 4971, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Patrick Guillaumont, 2011. "The concept of structural economic vulnerability and its relevance for the identification of the Least Developed Countries and other purposes," CDP Background Papers 012, United Nations, Department of Economics and Social Affairs.

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