Loans or Grants?
AbstractWe argue in this paper that cancelling the debt of the poorest countries was a good thing, but that it should not imply that the debt instrument should be foregone. Debt and debt cancellations are indeed two complementary instruments which, if properly managed, perform better than either loans or grants taken in isolation. The core of the intuition, which we develop in a simple two-period model, relates to the fact that the poorest countries are also the most volatile, so that contingent facilities, explicitly incorporating debt cancellation mechanisms, are a valuable instrument.
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Bibliographic InfoPaper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2007/06.
Length: 18 pages
Date of creation: 2007
Date of revision:
grants; loans; developing countries;
Other versions of this item:
- Daniel Cohen & Pierre Jacquet & Helmut Reisen, 2007. "Loans or Grants?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 764-782, December.
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
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