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Dynamic Fiscal Impact of The Debt Relief Initiatives on African Highly Indebted Poor Countries (HIPCs)

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  • Van Campenhout, Bjorn
  • Raffinot, Marc
  • Ferry, Marin
  • Cassimon, Danny

Abstract

After two debt relief initiatives launched in 1996 (the Heavily Indebted Poor Countries, HIPC Initiative) and in 1999 (The enhanced HIPC initiative), the G7 decided to go further by cancelling the remaining multilateral debt for these HIPC countries through the Multilateral Debt Relief Initiative (MDRI, 2005). A few papers tried to assess the desired fiscal response effects of those initiatives. This paper uses an extended dataset and alternative econometric techniques in order to tackle methodological issues as endogeneity and fixed effects. We found that debt relief and especially the enhanced HIPC initiative have had a positive impact on the total domestic revenue and the public investment (as percentages of the GDP). Thanks to our large observation span, we also observed that the MDRI led to a significant additional improvement of the level of public investment and domestic revenues ratio, although these effects are smaller than the HIPCs ones.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/10905.

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Date of creation: Jan 2013
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Publication status: Published in DIAL Document de travail, 2013
Handle: RePEc:dau:papers:123456789/10905

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Related research

Keywords: PPTE; IADM; HIPC; MDRI; Debt relief; Fiscal revenue; Public investment; Fiscal response;

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  1. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
  2. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, Università di Perugia, vol. 2(3).
  3. Danny Cassimon & Bjorn Van campenhout, 2008. "Comparative Fiscal Response Effects Of Debt Relief: An Application To African Hipcs," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 76(3), pages 427-442, 09.
  4. 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.
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  6. Danny Cassimon & Bjorn Van Campenhout, 2007. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a Panel of HIPC Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 143(4), pages 742-763, December.
  7. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2003. "Policy Selectivity Forgone: Debt and Donor Behavior in Africa," World Bank Economic Review, World Bank Group, World Bank Group, vol. 17(3), pages 409-435, December.
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  12. Cohen, Daniel, 2001. "The HIPC Initiative: True and False Promises," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 4(3), pages 363-80, Winter.
  13. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, Elsevier, vol. 16(1), pages 155-155, May.
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  15. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, StataCorp LP, vol. 9(1), pages 86-136, March.
  16. Raffinot, Marc, 2008. "La dette des tiers-mondes," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/7875, Paris Dauphine University.
  17. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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