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Consequences of Debt Relief Initiatives in the 1990s

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  • Ralf Hepp

    (University of California, Davis)

Abstract

In this paper I investigate the effects of recent debt relief initiatives such as the Heavily Indebted Poor Countries (HIPC) Debt Initiative of 1996 on resource flows to developing countries. Focusing on a sample of low-income countries, I concentrate on the following questions. First, is the HIPC initiative selective in the sense of “rewarding” improved policies in HIPC countries with higher transfers? Measuring improvement directly with dummy variables representing progress in the initiative, I find that good macroeconomic management does not seem to matter in terms of the level of resource transfers and foreign aid received by a HIPC country. Second, have HIPCs and non-HIPCs experienced reductions in aid inflows (other than debt relief) in the 1990s and early 2000s? My estimates suggest that countries classified as HIPCs received higher (official and aggregate) net transfers than non- HIPC countries in the first half of the 1990s. These differences persist after 1996, however, at a lower level. Looking at net official development assistance, differences between HIPC countries and non-HIPC countries persist throughout the 1990s and early 2000s, with higher levels of aid going to HIPC countries. Third, have the debt relief initiatives in the 1990s provided additional resources to low-income countries? Confirming findings in earlier literature, my results suggest that aid flows have not changed significantly in response to debt relief.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0510004.

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Length: 36 pages
Date of creation: 04 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0510004

Note: Type of Document - pdf; pages: 36
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Web page: http://128.118.178.162

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Keywords: HIPC debt initiative; foreign aid; selectivity; additionality;

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  1. Cohen, Daniel, 2001. "The HIPC Initiative: True and False Promises," International Finance, Wiley Blackwell, vol. 4(3), pages 363-80, Winter.
  2. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
  3. Nicolas Depetris Chauvin & Aart Kraay, 2007. "Who Gets Debt Relief?," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 333-342, 04-05.
  4. Nancy Birdsall & John Williamson, 2002. "Delivering on Debt Relief: From IMF Gold to a New Aid Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 337.
  5. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Measuring Aid Flows: A New Approach," Research Department Publications 4146, Inter-American Development Bank, Research Department.
  6. Alesina, Alberto & Weder, Beatrice, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," Scholarly Articles 4553011, Harvard University Department of Economics.
  7. BERLAGE, Lodewijk & CASSIMON, Danny & DRÈZE, Jacques & REDING, Paul, . "Prospective aid and indebtedness relief: a proposal," CORE Discussion Papers RP -1660, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Henry, Peter B. & Arslanalp, Serkan, 2003. "Is Debt Relief Efficient?," Research Papers 1837, Stanford University, Graduate School of Business.
  9. Jacky Amprou & Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 2007. "Aid Selectivity According to Augmented Criteria," The World Economy, Wiley Blackwell, vol. 30(5), pages 733-763, 05.
  10. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2003. "Policy Selectivity Forgone: Debt and Donor Behavior in Africa," World Bank Economic Review, World Bank Group, vol. 17(3), pages 409-435, December.
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  13. Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
  14. Dollar, David & Levin, Victoria, 2004. "Increasing selectivity of foreign aid, 1984-2002," Policy Research Working Paper Series 3299, The World Bank.
  15. repec:fth:louvco:0032 is not listed on IDEAS
  16. Silvia Marchesi & Alessandro Missale, 2004. "What does motivate lending and aid to the HIPCs?," Development Working Papers 189, Centro Studi Luca d\'Agliano, University of Milano.
  17. Nunnenkamp, Peter & Thiele, Rainer, 2006. "Targeting aid to the needy and deserving : nothing but promises?," Open Access Publications from Kiel Institute for the World Economy 3875, Kiel Institute for the World Economy (IfW).
  18. Ralf Hepp, 2005. "Consequences of Debt Relief Initiatives in the 1990s," International Finance 0510004, EconWPA.
  19. Cassimon, Danny & Claessens, Stijn & Campenhout, Bjorn van, 2007. "Empirical Evidence on the New International Aid Architecture," Proceedings of the German Development Economics Conference, Göttingen 2007 2, Verein für Socialpolitik, Research Committee Development Economics.
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  22. Birdsall, Nancy & Claessens, Stijn & Diwan, Ishac, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," CEPR Discussion Papers 3297, C.E.P.R. Discussion Papers.
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Cited by:
  1. HEPP, Ralf, 2010. "CONSEQUENCES OF DEBT RELIEF INITIATIVES IN THE 1990s," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
  2. Ugo Panizza, 2008. "The External Debt Contentious Six Years after the Monterrey Consensus," G-24 Discussion Papers 51, United Nations Conference on Trade and Development.

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