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Can Debt Relief Buy Growth?

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  • Ralf Hepp

    (Fordham University, Department of Economics)

Abstract

In this paper, I investigate whether the numerous debt relief initiatives during the 1990s have had a significant effect on economic growth rates in developing countries. The major initiatives during that time period were negotiated as bilateral agreements under the guidance of the Paris Club of Creditors. These agreements were followed up by the Heavily Indebted Poor Countries (HIPC) debt relief initiative in 1996 and its "enhanced" version in 1999 under the guidance of the World Bank and the International Monetary Fund. I find that, on average, debt relief had no effect on growth rates of developing countries. However, the effect on growth rates differed for different subsets of developing countries. I find that countries that are not classified as HIPC have benefited significantly from debt relief, whereas the growth rates of HIPC countries remained unaffected.

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Bibliographic Info

Paper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2008-22.

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Date of creation: 2008
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Handle: RePEc:frd:wpaper:dp2008-22

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Web page: http://www.fordham.edu/economics/
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Keywords: HIPC debt initiative; debt relief; foreign aid; growth;

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References

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Citations

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Cited by:
  1. Museru, Malimu & Toerien, Francois & Gossel, Sean, 2014. "The Impact of Aid and Public Investment Volatility on Economic Growth in Sub-Saharan Africa," World Development, Elsevier, vol. 57(C), pages 138-147.
  2. Bjørnskov, Christian & Schröder, Philipp J.H., 2013. "Are debt repayment incentives undermined by foreign aid?," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1073-1091.
  3. Johansson, Pernilla, 2008. "Debt Relief, Investment and Growth," Working Papers 2008:11, Lund University, Department of Economics.
  4. Winston Moore & Chrystol Thomas, 2010. "A meta-analysis of the relationship between debt and growth," International Journal of Development Issues, Emerald Group Publishing, vol. 9(3), pages 214-225, July.

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