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Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a Panel of HIPCs

Author

Listed:
  • Danny Cassimon
  • Bjorn van Campenhout

Abstract

Substantial amounts of debt relief have been granted to a set of low-income countries, as an alternative aid modality. Although the theoretical case for debt relief is firmly established, only empirical analysis can show whether debt relief is indeed a (more) effective mode of aid delivery. We investigate the linkages between debt relief and other fiscal variables such as current expenditure, government investment, taxation and domestic borrowing, in comparison to the effects of grants and concessional loans. We find that the fiscal impact of HIPC debt relief follows fairly complex dynamics.

Suggested Citation

  • Danny Cassimon & Bjorn van Campenhout, 2007. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a Panel of HIPCs," WIDER Working Paper Series RP2007-59, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2007-59
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    Citations

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    Cited by:

    1. Joanna Gravier-Rymaszewska, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," WIDER Working Paper Series wp-2012-025, World Institute for Development Economic Research (UNU-WIDER).
    2. Philip Michael Kargbo & Kunal Sen, 2014. "Aid Categories that Foster Pro‐Poor Growth: The Case of Sierra Leone," African Development Review, African Development Bank, vol. 26(2), pages 416-429, June.
    3. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    4. Marc Audi & Amjad Ali, 2023. "Public Policy and Economic Misery Nexus: A Comparative Analysis of Developed and Developing World," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 56-73, May.
    5. Minh Tam Schlosky & Andrew Young, 2017. "Can foreign aid motivate institutional reform? An evaluation of the HIPC Initiative," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 6(2), pages 242-258, August.
    6. Ibrahim Mohammed Adamu, 2016. "Public Investment in Nigeria. Does External Debt Matter?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(4), pages 120-138, December.
    7. Heylen, Fanny, 2010. "Analyzing the poverty impact of the enhanced Heavily Indebted Poor Countries (HIPC) initiative in Bolivia," Documentos de trabajo 1/2010, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    8. Danny Cassimon & Marin Ferry & Marc Raffinot & Bjorn van Campenhout, 2017. "Dynamic Fiscal Impact of The Debt Relief Initiatives on African Highly Indebted Poor Countries (HIPCs)," Working Papers hal-01489613, HAL.
    9. Cordella, Tito & Missale, Alessandro, 2013. "To give or to forgive? Aid versus debt relief," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 504-528.
    10. Megersa, kelbesa & Cassimon, Danny, 2016. "Debt Sustainability and direction of trade: What does Africa’s shifting engagement with BRIC and OECD tells us?," MPRA Paper 76581, University Library of Munich, Germany.
    11. Gravier-Rymaszewska, Joanna, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    12. repec:nam:befdwp:3 is not listed on IDEAS
    13. Salah Eddine Salhi & Sara El Aboudi, 2021. "Inflation, External Debt, and Fiscal Mobilization in Morocco: The Transmission Channels of Devaluation and the Inflationary Past," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(7), pages 545-562, July.
    14. repec:unu:wpaper:wp2012-25 is not listed on IDEAS
    15. Fuhmei Wang, 2009. "The effects of foreign borrowing policies on economic growth: success or failure?," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(4), pages 273-284.
    16. Danny Cassimon & Olusegun Fadare & George Mavrotas, 2023. "The Impact of Food Aid and Governance on Food and Nutrition Security in Sub-Saharan Africa," Sustainability, MDPI, vol. 15(2), pages 1-19, January.
    17. George Mavrotas & Peter Nunnenkamp, 2007. "Foreign Aid Heterogeneity: Issues and Agenda," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 585-595, December.
    18. Tari Lestari, 2014. "Can Indonesia’s Fiscal Policy be Sustained, with Exploding Debt?," Working Papers in Economics and Development Studies (WoPEDS) 201415, Department of Economics, Padjadjaran University, revised Nov 2014.
    19. Yu Ri Kim, 2019. "Does aid for trade diversify the export structure of recipient countries?," The World Economy, Wiley Blackwell, vol. 42(9), pages 2684-2722, September.
    20. Danny Cassimon & Marin Ferry & Marc Raffinot & Bjorn Van Campenhout, 2013. "Dynamic fiscal impact of the debt relief initiatives on african heavily indebted poor countries (HIPCs)," Working Papers DT/2013/01, DIAL (Développement, Institutions et Mondialisation).
    21. Salah Eddine Salhi & Sara El Aboudi, 2021. "Inflation, External Debt, and Fiscal Mobilization in Morocco: The Transmission Channels of Devaluation and the Inflationary Past," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(7), pages 545-562.
    22. Felix Kimtai Kiminyei, 2019. "Empirical Investigation on the Relationship among Kenyan Public Debt, Tax Revenue and Government Expenditure," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(1), pages 142-159, March.
    23. Ahmad, Ahmad Hassan & Pentecost, Eric J. & Stack, Marie M., 2023. "Foreign aid, debt interest repayments and Dutch disease effects in a real exchange rate model for African countries," Economic Modelling, Elsevier, vol. 126(C).
    24. Fuhmei Wang, 2009. "The effects of foreign borrowing policies on economic growth: success or failure?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 12(4), pages 273-284.
    25. repec:dau:papers:123456789/10905 is not listed on IDEAS

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