Advanced Search
MyIDEAS: Login

How did highly indebted poor countries become highly indebted? : reviewing two decades of debt relief

Contents:

Author Info

  • Easterly, William

Abstract

How did highly indebted poor countries become highly indebted after two decades of debt relief efforts? A set of theoretical models predict that countries with unchanged long-run savings preferences will respond to debt relief with a mixture of asset decumulation and new borrowing. A model also predicts that a high-discount-rate government will choose poor policies and impose its inter-temporal preferences on the entire economy. Reviewing the experience of highly indebted poor countries, compared with that of other developing countries, the author finds direct and indirect evidence of asset decumulation and new borrowing associated with debt relief. The ratio of the net present value of debt to exports rose strongly over 1979-97 despite the debt relief efforts. Average policies in highly indebted poor countries were generally worse than those in other developing countries, nor were wars more likely in highly indebted poor countries. Over time there has been an important shift in financing for highly indebted poor countries, away from private and bilateral nonconcessional sources to the International Development Association and other sources of multilateral concessional financing. But this implicit form of debt relief also failed to reduce debt in net present value terms. Although debt relief is done in the name of the poor, the poor are worse off if debt relief creates incentives to delay reforms needed for growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1999/12/11/000094946_99120105303387/Rendered/PDF/multi_page.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2225.

as in new window
Length:
Date of creation: 30 Nov 1999
Date of revision:
Handle: RePEc:wbk:wbrwps:2225

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Environmental Economics&Policies; Strategic Debt Management; Economic Theory&Research; Payment Systems&Infrastructure; Banks&Banking Reform; Environmental Economics&Policies; Strategic Debt Management; Financial Intermediation; Economic Theory&Research; Banks&Banking Reform;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 38-71, March.
  2. Easterly, William, 1999. "When is fiscal adjustment an illusion?," Policy Research Working Paper Series 2109, The World Bank.
  3. Nouriel Roubini & Paul Wachtel, 1997. "Current Account Sustainability in Transition Economies," Working Papers 97-03, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Joshua Greene, 1989. "The External Debt Problem of Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 836-874, December.
  5. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  6. Dadush, Uri & Dhareshwar, Ashok & Johannes, Ron, 1994. "Are private capital flows to developing countries sustainable?," Policy Research Working Paper Series 1397, The World Bank.
  7. Cohen, Daniel, 1996. "The sustainability of African debt," Policy Research Working Paper Series 1621, The World Bank.
  8. Allan Drazen & William Easterly, 2001. "Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 129-157, 07.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Birdsall, Nancy & Claessens, Stijn & Diwan, Ishac, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Silvia Marchesi & Alessandro Missale, 2012. "How defensive were lending and aid to HIPC?," Working Papers 220, University of Milano-Bicocca, Department of Economics, revised Feb 2012.
  3. Alessandro Missale & Silvia Marchesi, 2004. "What does motivate lending and aid to the HIPCs?," International Finance 0411006, EconWPA.
  4. Alesina, Alberto & Weder, Beatrice, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," Scholarly Articles 4553011, Harvard University Department of Economics.
  5. Silvia Marchesi & Laura Sabani, 2005. "IMF concern for reputation and conditional lending failure: theory and empirics," Department of Economics University of Siena 447, Department of Economics, University of Siena.
  6. Robbie Mochrie, 2000. "An Appraisal of Debt Relief for Poor Countries," CERT Discussion Papers 0005, Centre for Economic Reform and Transformation, Heriot Watt University.
  7. Ndikumana, Leonce, 2002. "Additionality of Debt Relief and Debt Forgiveness, and Implications for Future Volumes of Official Assistance," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Ralf Hepp, 2005. "Health Expenditures Under the HIPC Debt Initiative," International Finance 0510005, EconWPA.
  9. Ratha, Dilip, 2001. "Complementarity between multilateral lending and private flows to developing countries : some empirical results," Policy Research Working Paper Series 2746, The World Bank.
  10. Silvia Marchesi & Laura Sabani, 2005. "Prolonged Use and Conditionality Failure: Investigating the IMF Responsibility," Development Working Papers 202, Centro Studi Luca d\'Agliano, University of Milano.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2225. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.