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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, 1999. "Investment: Fundamentals and Finance," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 223-274 National Bureau of Economic Research, Inc.
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  15. Cassimon, Danny & Van Campenhout, Bjorn, 2006. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a panel of HIPC Countries," IOB Working Papers 2006.02, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
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