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Can Debt Relief Buy Growth?

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Author Info
Ralf Hepp (University of California, Davis)

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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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Publisher 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
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Handle: RePEc:wpa:wuwpif:0510003

Note: Type of Document - pdf; pages: 35
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Related research
Keywords: HIPC debt initiative foreign aid growth

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Find related papers by JEL classification:
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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References listed on IDEAS
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  3. Cohen, Daniel, 2000. "The HIPC Initiative: True and False Promises," CEPR Discussion Papers 2632, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2003. "Policy Selectivity Forgone: Debt and Donor Behavior in Africa," World Bank Economic Review, Oxford University Press, vol. 17(3), pages 409-435, December.
    Other versions:
  6. Claessens, Stijn & Detragiache, Enrica & Kanbur, Ravi & Wickham, Peter, 1996. "Analytical aspects of the debt problems of heavily indebted poor countries," Policy Research Working Paper Series 1618, The World Bank. [Downloadable!]
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  8. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March. [Downloadable!] (restricted)
  9. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September. [Downloadable!] (restricted)
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  11. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank. [Downloadable!]
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  12. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA. [Downloadable!]
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  13. Anthony R. Boote & Kamau Thugge, 1997. "Debt Relief for Low-Income Countries and the HIPC Initiative," IMF Working Papers 97/24, International Monetary Fund.
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Cited by:
(explanations, 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.)

  1. Fikru, Mahelet G & Getachew, Bizuayehu, 2008. "Can debt relief lead to development in Africa?," MPRA Paper 9955, University Library of Munich, Germany. [Downloadable!]
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