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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. Christopher L. Gilbert & Alexandra Tabova, 2005. "Can we link concessional debt service to commodity prices?," Department of Economics Working Papers 0508, Department of Economics, University of Trento, Italia.
    2. Kraay, Aart & Nehru, Vikram, 2004. "When is external debt sustainable?," Policy Research Working Paper Series 3200, The World Bank.
    3. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    4. Madhur Gautam, 2003. "Debt Relief for the Poorest : An OED Review of the HIPC Initiative," World Bank Publications, The World Bank, number 15164, October.
    5. 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," IMF Working Papers 98/72, International Monetary Fund.
    6. 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.
    2. Sèna Kimm Gnangnon, 2012. "Does Structural Economic Vulnerability Matter for Public Indebtedness in Developing Countries?," Working Papers halshs-00749469, HAL.
    3. Sèna Kimm Gnangnon, 2012. "Structural Vulnerability and Excessive Public Indebtedness in CFA Franc Zone Countries," Working Papers halshs-00749470, HAL.
    4. Gnangnon, Sèna Kimm, 2013. "Structural vulnerability and excessive public indebtedness in CFA Franc Zone countries," Economic Modelling, Elsevier, vol. 35(C), pages 816-832.

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