To give or to forgive ? aid versus debt relief
Is generalized debt relief an effective development strategy, or should assistance be tailored to countries'characteristics? To answer this question, the authors build a simple model in which recipient governments reveal their creditworthiness if donors offer them to choose between aid and debt relief. Since offering such a menu is costly, it is preferred by donors only when the cost of assistance is low, and the probability that an indebted country is creditworthy is high enough. For lower probabilities and higher costs of assistance, donors prefer a policy of only debt relief. Very limited aid is the preferred policy only for high costs of assistance, and low probabilities that the government is creditworthy.
|Date of creation:||01 Oct 2011|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Claudio Raddatz, 2011.
"Multilateral Debt Relief through the Eyes of Financial Markets,"
The Review of Economics and Statistics,
MIT Press, vol. 93(4), pages 1262-1288, November.
- Raddatz, Claudio, 2009. "Multilateral debt relief through the eyes of financial markets," Policy Research Working Paper Series 4872, The World Bank.
- Serkan Arslanalp & Peter Blair Henry, 2004.
"Is Debt Relief Efficient?,"
NBER Working Papers
10217, National Bureau of Economic Research, Inc.
- Cassimon, Danny & van Campenhout, Bjorn, 2007. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a Panel of HIPCs," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Michaelowa, Katharina, 2003.
"The Political Economy of the Enhanced HIPC-Initiative,"
Springer, vol. 114(3-4), pages 461-76, March.
- Michaelowa, Katharina, 2002. "The political economy of the enhanced HIPC-initiative," HWWA Discussion Papers 161, Hamburg Institute of International Economics (HWWA).
- Jean Imbs & Romain Rancière, 2005.
"The Overhang Hangover,"
Swiss Finance Institute Research Paper Series
06-03, Swiss Finance Institute.
- Jean Imbs & Romain Rancière, 2005. "The overhang hangover," Economics Working Papers 878, Department of Economics and Business, Universitat Pompeu Fabra.
- Jean Imbs & Romain Ranciere, 2005. "The Overhang Hangover," Working Papers 219, Barcelona Graduate School of Economics.
- Imbs, Jean & Rancière, Romain, 2005. "The Overhang Hangover," CEPR Discussion Papers 5210, C.E.P.R. Discussion Papers.
- Imbs, Jean & Ranciere, Romain, 2005. "The overhang hangover," Policy Research Working Paper Series 3673, The World Bank.
- Imbs, Jean & Ranciere, Romain, 2006. "The Overhang Hangover," CEPREMAP Working Papers (Docweb) 0604, CEPREMAP.
- Graham Bird & Alistair Milne, 2003. "Debt Relief for Low Income Countries: Is it Effective and Efficient?," The World Economy, Wiley Blackwell, vol. 26(1), pages 43-59, January.
- Helmut Reisen & Sokhna Ndoye, 2008. "Prudent versus Imprudent Lending to Africa: From debt relief to emerging lenders," OECD Development Centre Working Papers 268, OECD Publishing.
- Corinne Deléchat & Gustavo Ramirez & Smita Wagh & John Wakeman-Linn, 2010. "How Global Financial Markets Affect Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 172-208, April.
- 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).
- Danny Cassimon & Bjorn Van Campenhout, 2007. "Aid Effectiveness, Debt Relief and Public Finance Response: Evidence from a Panel of HIPC Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 742763-7427, December.
- Cohen, Daniel, 1993. "Low Investment and Large LDC Debt in the 1980's," American Economic Review, American Economic Association, vol. 83(3), pages 437-449, June.
- Helene Poirson Ward & Luca A Ricci & Catherine A Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 04/15, International Monetary Fund.
- Jeremy Bulow, 2002. "First World Governments and Third World Debt: A Bankruptcy Court for Sovereign Lending?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 229-256.
- Jeffrey D. Sachs, 2002. "Resolving the Debt Crisis of Low-Income Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 257-286.
- Presbitero, Andrea F., 2008.
"Debt Relief Effectiveness and Institution Building,"
12597, University Library of Munich, Germany.
- Andrea F. Presbitero, 2009. "Debt-Relief Effectiveness and Institution-Building," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 529-559, 09.
- Andrea Filippo Presbitero, 2009. "Debt Relief Effectiveness and Institution Building," Mo.Fi.R. Working Papers 15, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Easterly, William, 2002. "How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief," World Development, Elsevier, vol. 30(10), pages 1677-1696, October.
- Helene Poirson Ward & Luca A Ricci & Catherine A Pattillo, 2002.
"External Debt and Growth,"
IMF Working Papers
02/69, International Monetary Fund.
- Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA.
- Tito Cordella & Giovanni Dell'Ariccia, 2007. "Budget Support Versus Project Aid: A Theoretical Appraisal," Economic Journal, Royal Economic Society, vol. 117(523), pages 1260-1279, October.
- Johansson, Pernilla, 2010. "Debt Relief, Investment and Growth," World Development, Elsevier, vol. 38(9), pages 1204-1216, September.
- Giovanni Dell'Ariccia & Tito Cordella, 2002.
"Limits of Conditionality in Poverty Reduction Programs,"
IMF Working Papers
02/115, International Monetary Fund.
- Tito Cordella & Giovanni Dell'Aricca, 2002. "Limits of Conditionality in Poverty Reduction Programs," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 68-86.
- Paul R. Krugman, 1988.
"Financing vs. Forgiving a Debt Overhang,"
NBER Working Papers
2486, National Bureau of Economic Research, Inc.
- Serkan Arslanalp & Peter Blair Henry, 2006. "Policy Watch: Debt Relief," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 207-220, Winter.
- Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-855, September.
- Asiedu, Elizabeth, 2003. "Debt relief and institutional reform: a focus on Heavily Indebted Poor Countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 614-626.
- Andrea PRESBITERO, 2005.
"The Debt-Growth Nexus: a Dynamic Panel Data Estimation,"
243, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
- Presbitero Andrea F., 2006. "The Debt-Growth Nexus: a Dynamic Panel Data Estimation," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 417-462.
- Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
- Murshed, S Mansoob & Sen, Somnath, 1995. "Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information," Economic Journal, Royal Economic Society, vol. 105(429), pages 498-509, March.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5859. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.