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Dynamic Fiscal Impact of The Debt Relief Initiatives on African Highly Indebted Poor Countries (HIPCs)

  • Van Campenhout, Bjorn
  • Raffinot, Marc
  • Ferry, Marin
  • Cassimon, Danny

After two debt relief initiatives launched in 1996 (the Heavily Indebted Poor Countries, HIPC Initiative) and in 1999 (The enhanced HIPC initiative), the G7 decided to go further by cancelling the remaining multilateral debt for these HIPC countries through the Multilateral Debt Relief Initiative (MDRI, 2005). A few papers tried to assess the desired fiscal response effects of those initiatives. This paper uses an extended dataset and alternative econometric techniques in order to tackle methodological issues as endogeneity and fixed effects. We found that debt relief and especially the enhanced HIPC initiative have had a positive impact on the total domestic revenue and the public investment (as percentages of the GDP). Thanks to our large observation span, we also observed that the MDRI led to a significant additional improvement of the level of public investment and domestic revenues ratio, although these effects are smaller than the HIPCs ones.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/10905/1/DT%202013-01%20Cassimon-Ferry-%20Van%20Campenhout-Raffinot-1.pdf
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/10905.

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Date of creation: Jan 2013
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Publication status: Published in DIAL Document de travail, 2013
Handle: RePEc:dau:papers:123456789/10905
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  1. Christophe Hurlin & Elena Dumitrescu, 2012. "Testing for Granger Non-causality in Heterogeneous Panels," Working Papers halshs-00224434, HAL.
  2. Idlemouden, Khadija & Raffinot, Marc, 2005. "Le fardeau virtuel de la dette extérieure. Une revue de la littérature à l'aune de l'initiative « pays pauvres très endettés » (PPTE)," Economics Papers from University Paris Dauphine 123456789/4089, Paris Dauphine University.
  3. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002. "External Debt and Growth," IMF Working Papers 02/69, International Monetary Fund.
  4. Cohen, Daniel, 2000. "The HIPC Initiative: True and False Promises," CEPR Discussion Papers 2632, C.E.P.R. Discussion Papers.
  5. Robert Osei & Oliver Morrissey & Tim Lloyd, 2005. "The fiscal effects of aid in Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1037-1053.
  6. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  7. David Roodman, 2006. "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Working Papers 103, Center for Global Development.
  8. Andrea F Presbitero, 2012. "Total Public Debt and Growth in Developing Countries," The European Journal of Development Research, Palgrave Macmillan, vol. 24(4), pages 606-626, September.
  9. Danny Cassimon & Bjorn Van campenhout, 2008. "Comparative Fiscal Response Effects Of Debt Relief: An Application To African Hipcs," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 427-442, 09.
  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.
  11. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  12. Cohen, Daniel, 1990. "Debt Relief: Implications of Secondary Market Discounts and Debt Overhangs," World Bank Economic Review, World Bank Group, vol. 4(1), pages 43-53, January.
  13. Raffinot, Marc, 2008. "La dette des tiers-mondes," Economics Papers from University Paris Dauphine 123456789/7875, Paris Dauphine University.
  14. Cassimon, Danny & Van Campenhout, Bjorn, 2006. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a panel of HIPC Countries," IOB Working Papers 2006.02, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
  15. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund.
  16. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  17. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
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