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Hiccups for HIPCs?


  • Craig Burnside
  • Domenico Fanizza


In this paper we discuss fiscal and monetary policy issues facing heavily-indebted poor countries (HIPCs) who receive debt reduction via the enhanced HIPC initiative. This debt relief program is distinguished from previous ones by its conditionality: freed resources must be used for poverty reduction. We argue that (i) this conditionality severely limits the extent to which the initiative provides significant debt relief; (ii) depending on the response of monetary policy to an increase in social spending there could be a short-run increase in inflation in HIPC countries and (iii) the keys to long-run fiscal sustainability in the HIPCs are significant fiscal reforms by their governments, and the effectiveness of their poverty reduction programs in raising growth.

Suggested Citation

  • Craig Burnside & Domenico Fanizza, 2004. "Hiccups for HIPCs?," NBER Working Papers 10903, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10903
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    1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
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    Cited by:

    1. Edward Buffie & Christopher Adam & Stephen O'Connell & Catherine Pattillo, 2004. "Exchange Rate Policy and the Management of Official and Private Capital Flows in Africa," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 126-160, June.
    2. Buffie, Edward & Adam, Christopher & O'Connell, Stephen & Pattillo, Catherine, 2008. "Riding the wave: Monetary responses to aid surges in low-income countries," European Economic Review, Elsevier, vol. 52(8), pages 1378-1395, November.
    3. Neumayer, Eric, 2002. "Is Good Governance Rewarded? A Cross-national Analysis of Debt Forgiveness," World Development, Elsevier, vol. 30(6), pages 913-930, June.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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