The history of debt relief is now particularly long, the associated costs are soaring and the outcomes are at least uncertain. This paper reviews and provides new evidence on the effects of recent debt relief programs on different macroeconomic indicators in developing countries, focusing on the Highly Indebted Poor Countries. Besides, the relationship between debt relief and institutional change is investigated to assess whether donors are moving towards and ex-post governance conditionality. Results show that debt relief is only weakly associated with subsequent improvements in economic performance but it is correlated with increasing domestic debt in HIPCs, undermining the positive achievements in reducing external debt service. Finally, there is evidence that donors are moving towards a more sensible allocation of debt forgiveness, rewarding countries with better policies and institutions.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
12597.
Find related papers by JEL classification: O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development F34 - International Economics - - International Finance - - - International Lending and Debt Problems H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
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Simeon Djankov & Jose Montalvo & Marta Reynal-Querol, 2008.
"The curse of aid,"
Journal of Economic Growth,
Springer, vol. 13(3), pages 169-194, September.
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Simeon Djankov & José Garcia Montalvo & Marta Reynal-Querol, 2005.
"The Curse of Aid,"
Economics Working Papers
870, Department of Economics and Business, Universitat Pompeu Fabra.
[Downloadable!]