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Debt Relief and Changing Governance Structures in Developing Countries

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  • Andreas Freytag

    () (University of Jena, Faculty of Economics)

  • Gernot Pehnelt

    () (University of Jena, Faculty of Economics)

Abstract

In this paper we empirically discuss the question whether or not debt relief in the past fifteen years has been economically rational. Analysing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s. Furthermore, even the actual debt burden of highly indebted poor countries had not been crucial for the decision whether or not debt forgiveness was granted. Rather, debt relief followed a strong path dependence: those countries whose debt had been forgiven in the first half of the 1990s have also been granted debt forgiveness in the second half of this decade. However, this allocation pattern changed at the beginning of the 21st century, where the path dependence was less strong and at least some dimensions of governance quality have been taken into account by donor countries.

Suggested Citation

  • Andreas Freytag & Gernot Pehnelt, 2006. "Debt Relief and Changing Governance Structures in Developing Countries," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 31/2006, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
  • Handle: RePEc:jen:jenasw:2006-31
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    Cited by:

    1. Marin Ferry, 2015. "The Carrot and Stick Approach to Debt Relief : Overcoming Moral Hazard," Working Papers DT/2015/14, DIAL (Développement, Institutions et Mondialisation).
    2. Andreas Freytag & Martin Paldam, 2012. "Comparing good and bad borrowing in developing countries - a study of twin cases," Global Financial Markets Working Paper Series 2012-31, Friedrich-Schiller-University Jena.

    More about this item

    Keywords

    debt relief; HIPC; development; governance; institutional quality;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O29 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Other

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