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Can Debt Relief Buy Growth?

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  • Ralf Hepp

    (University of California, Davis)

Abstract

The purpose of the paper is twofold. First, I investigate whether numerous debt initiatives during the 1980s and 1990s have had a significant effect on economic growth rates in developing countries in general. The major initiatives during that time period were negotiated as bilateral agreements under the guidance of the Paris Club of Creditors. These agreements were complemented later on by the Heavily Indebted Poor Countries (HIPC) debt relief initiative in 1996 and its “enhanced” version in 1999. I find that, on average, debt relief has no effect on growth rates of developing countries. The second question I address in this paper is whether the effect on growth rates was different 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 have been unaffected.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0510003.

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Length: 35 pages
Date of creation: 04 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0510003

Note: Type of Document - pdf; pages: 35
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Web page: http://128.118.178.162

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Keywords: HIPC debt initiative; foreign aid; growth;

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References

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Citations

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Cited by:
  1. 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.
  2. 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.
  3. Johansson, Pernilla, 2008. "Debt Relief, Investment and Growth," Working Papers 2008:11, Lund University, 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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