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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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Citations

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Cited by:
  1. Johansson, Pernilla, 2008. "Debt Relief, Investment and Growth," Working Papers 2008:11, Lund University, Department of Economics.
  2. Moore, Winston & Thomas, Chrystol, 2008. "A Meta-Analysis of the Relationship between Debt and Growth," MPRA Paper 21474, University Library of Munich, Germany.
  3. Bjørnskov, Christian & Schröder, Philipp J.H., 2010. "Are Debt Repayment Incentives Undermined by Foreign Aid?," Working Papers 10-20, University of Aarhus, Aarhus School of Business, Department of Economics.
  4. 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.

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