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Loans or Grants?

  • Daniel Cohen
  • Pierre Jacquet
  • Helmut Reisen

In this paper they argue that cancelling the debt of the poorest countries was a good thing, but that it should not imply that the debt instrument should be foregone. Debt and debt cancellations are indeed two complementary instruments which, if properly managed, perform better than either loans or grants taken in isolation. The core of the intuition, which they develop in a simple two-period model, relates to the fact that the poorest countries are also the most volatile, so that contingent facilities, explicitly incorporating debt cancellation mechanisms, are a valuable instrument. [Discussion Paper No. 2007/06]

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Date of creation: Nov 2010
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Handle: RePEc:ess:wpaper:id:3218
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  1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  2. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
  3. Devesh Kapur, 2002. "Do as I Say Not as I Do: A Critique of G-7 Proposals on Reforming the MDBs," Working Papers 16, Center for Global Development.
  4. Helmut Reisen & Julia von Maltzan, 1999. "Boom and Bust and Sovereign Ratings," OECD Development Centre Working Papers 148, OECD Publishing.
  5. Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Pierre Jacquet & Lisa Chauvet & Bertrand Savoye, 2007. "Attenuating through Aid the Vulnerability to Price Shocks," Post-Print hal-00293071, HAL.
  6. 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.
  7. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
  8. Matthew Odedokun, 2004. "Multilateral and Bilateral Loans versus Grants: Issues and Evidence," The World Economy, Wiley Blackwell, vol. 27(2), pages 239-263, 02.
  9. Odedokun, Matthew, 2003. "Economics and Politics of Official Loans versus Grants Panoramic Issues and Empirical Evidence," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Iman Sugema & Anis Chowdhury, 2005. "Aid and Fiscal Behaviour in Indonesia: The case of a lazy government," Centre for International Economic Studies Working Papers 2005-06, University of Adelaide, Centre for International Economic Studies.
  11. Daniel Cohen, 2000. "The HIPC Initiative: True and False Promises," OECD Development Centre Working Papers 166, OECD Publishing.
  12. Reisen, Helmut & Soto, Marcelo, 2001. "Which Types of Capital Inflows Foster Developing-Country Growth?," International Finance, Wiley Blackwell, vol. 4(1), pages 1-14, Spring.
  13. Robert Powell, 2003. "Debt Relief, Additionality, and Aid Allocation in Low Income Countries," IMF Working Papers 03/175, International Monetary Fund.
  14. Rodrik, Dani, 1995. "Why is there Multilateral Lending?," CEPR Discussion Papers 1207, C.E.P.R. Discussion Papers.
  15. Hulya Ulku & Tito Cordella, 2004. "Grants Versus Loans," IMF Working Papers 04/161, International Monetary Fund.
  16. Sanjeev Gupta & Benedict Clements & Emanuele Baldacci & Carlos Mulas-Granados, 2004. "The persistence of fiscal adjustments in developing countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 209-212.
  17. 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.
  18. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  19. Nunnenkamp, Peter & Thiele, Rainer & Wilfer, Tom, 2005. "Grants versus loans: Much ado about (almost) nothing," Kiel Economic Policy Papers 4, Kiel Institute for the World Economy (IfW).
  20. Bulow, Jeremy & Rogoff, Kenneth S., 2005. "Grants versus Loans for Development Banks," Scholarly Articles 11129181, Harvard University Department of Economics.
  21. Louise Young, 2002. "Determining the Discount Rate for Government Projects," Treasury Working Paper Series 02/21, New Zealand Treasury.
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