IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpif/0510004.html
   My bibliography  Save this paper

Consequences of Debt Relief Initiatives in the 1990s

Author

Listed:
  • Ralf Hepp

    (University of California, Davis)

Abstract

In this paper I investigate the effects of recent debt relief initiatives such as the Heavily Indebted Poor Countries (HIPC) Debt Initiative of 1996 on resource flows to developing countries. Focusing on a sample of low-income countries, I concentrate on the following questions. First, is the HIPC initiative selective in the sense of “rewarding” improved policies in HIPC countries with higher transfers? Measuring improvement directly with dummy variables representing progress in the initiative, I find that good macroeconomic management does not seem to matter in terms of the level of resource transfers and foreign aid received by a HIPC country. Second, have HIPCs and non-HIPCs experienced reductions in aid inflows (other than debt relief) in the 1990s and early 2000s? My estimates suggest that countries classified as HIPCs received higher (official and aggregate) net transfers than non- HIPC countries in the first half of the 1990s. These differences persist after 1996, however, at a lower level. Looking at net official development assistance, differences between HIPC countries and non-HIPC countries persist throughout the 1990s and early 2000s, with higher levels of aid going to HIPC countries. Third, have the debt relief initiatives in the 1990s provided additional resources to low-income countries? Confirming findings in earlier literature, my results suggest that aid flows have not changed significantly in response to debt relief.

Suggested Citation

  • Ralf Hepp, 2005. "Consequences of Debt Relief Initiatives in the 1990s," International Finance 0510004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpif:0510004
    Note: Type of Document - pdf; pages: 36
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0510/0510004.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. berlage, Lodewijk & cassimon, Danny & dreze, Jacques & Reding, Paul, 2003. "Prospective Aid and Indebtedness Relief: A Proposal," World Development, Elsevier, vol. 31(10), pages 1635-1654, October.
    2. Jacky Amprou & Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 2007. "Aid Selectivity According to Augmented Criteria," The World Economy, Wiley Blackwell, vol. 30(5), pages 733-763, May.
    3. 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.
    4. William R. Cline, 1995. "International Debt Reexamined," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 46, October.
    5. Howard White & Tony Killick & Steve Kayizzi-Mugerwa & Marie-Angelique Savane, 2001. "African Poverty at the Millennium : Causes, Complexities, and Challenges," World Bank Publications - Books, The World Bank Group, number 13866, November.
    6. Ndikumana, Leonce, 2004. "Additionality of debt relief and debt forgiveness, and implications for future volumes of official assistance," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 325-340.
    7. Cassimon, Danny & Claessens, Stijn & Campenhout, Bjorn van, 2007. "Empirical Evidence on the New International Aid Architecture," Proceedings of the German Development Economics Conference, Göttingen 2007 2, Verein für Socialpolitik, Research Committee Development Economics.
    8. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    9. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    10. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    11. Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, University Library of Munich, Germany.
    12. 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.
    13. repec:cor:louvrp:-1660 is not listed on IDEAS
    14. Dollar, David & Easterly, William, 1999. "The Search for the Key: Aid, Investment and Policies in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(4), pages 546-577, December.
    15. Ms. Christina Daseking & Mr. Robert Powell, 1999. "From Toronto Terms to the HIPC Initiative: A Brief History of Debt Relief for Low-Income Countries," IMF Working Papers 1999/142, International Monetary Fund.
    16. Jean‐Claude Berthélemy, 2006. "Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    17. Birdsall, Nancy & Claessens, Stijn & Diwan, Ishac, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," CEPR Discussion Papers 3297, C.E.P.R. Discussion Papers.
    18. Daniel Cohen, 2001. "The HIPC Initiative: True and False Promises," International Finance, Wiley Blackwell, vol. 4(3), pages 363-380.
    19. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    20. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    21. Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
    22. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Measuring Aid Flows: A New Approach," Research Department Publications 4146, Inter-American Development Bank, Research Department.
    23. Easterly, William, 1999. "How did highly indebted poor countries become highly indebted? : reviewing two decades of debt relief," Policy Research Working Paper Series 2225, The World Bank.
    24. World Bank, 2004. "World Development Indicators 2004," World Bank Publications - Books, The World Bank Group, number 13890, November.
    25. Mr. Tito Cordella & Mr. Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 2003/088, International Monetary Fund.
    26. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    27. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2003. "Policy Selectivity Forgone: Debt and Donor Behavior in Africa," The World Bank Economic Review, World Bank Group, vol. 17(3), pages 409-435, December.
    28. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Wiley Blackwell, vol. 29(9), pages 1177-1201, September.
    29. HEPP, Ralf, 2010. "CONSEQUENCES OF DEBT RELIEF INITIATIVES IN THE 1990s," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
    30. Nii Tackie, 2002. "The Impact of Selected Factors on Domain Consensus Between the International Monetary Fund (The World Bank) and Developing Countries," Journal of African Development, African Finance and Economic Association (AFEA), vol. 5(1), pages 36-51.
    31. Madhur Gautam, 2003. "Debt Relief for the Poorest : An OED Review of the HIPC Initiative," World Bank Publications - Books, The World Bank Group, number 15164, November.
    32. 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.
    33. R. Renard & D. Cassimon, 2003. "The Quality of Aid Statistics What We Should Be Measuring, and Why We Don’t," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(4), pages 652-674.
    34. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
    35. William Easterly, 2007. "Are aid agencies improving? [‘Who gives foreign aid to whom and why?’]," Economic Policy, CEPR;CES;MSH, vol. 22(52), pages 634-678.
    36. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
    37. Mr. Anthony R. Boote & Mr. Kamau Thugge, 1997. "Debt Relief for Low-Income Countries and the HIPC Initiative," IMF Working Papers 1997/024, International Monetary Fund.
    38. Mr. Robert Powell, 2003. "Debt Relief, Additionality, and Aid Allocation in Low Income Countries," IMF Working Papers 2003/175, International Monetary Fund.
    39. Dollar, David & Levin, Victoria, 2004. "Increasing selectivity of foreign aid, 1984-2002," Policy Research Working Paper Series 3299, The World Bank.
    40. Mark McGillivray, 2003. "Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations," WIDER Working Paper Series DP2003-71, World Institute for Development Economic Research (UNU-WIDER).
    41. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Measuring Aid Flows: A New Approach," Research Department Publications 4146, Inter-American Development Bank, Research Department.
    42. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    43. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    44. Nicolas Depetris Chauvin & Aart Kraay, 2007. "Who Gets Debt Relief?," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 333-342, 04-05.
    45. Steve Radelet, 2006. "A Primer on Foreign Aid," Working Papers 92, Center for Global Development.
    46. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    47. Jeffrey Sachs & Pia Malaney, 2002. "The economic and social burden of malaria," Nature, Nature, vol. 415(6872), pages 680-685, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andreas FREYTAG & Julian SCHMIED, 2019. "Debt Relief And Good Governance: New Evidence Of Developing Countries For The Period 1990-2013," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 19(1), pages 15-32.
    2. HEPP, Ralf, 2010. "CONSEQUENCES OF DEBT RELIEF INITIATIVES IN THE 1990s," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).
    3. Ugo Panizza, 2008. "The External Debt Contentious Six Years after the Monterrey Consensus," G-24 Discussion Papers 51, United Nations Conference on Trade and Development.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stijn Claessens & Danny Cassimon, 2007. "Empirical evidence on the new international aid architecture," WEF Working Papers 0026, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    2. Ralf Hepp, 2005. "Can Debt Relief Buy Growth?," International Finance 0510003, University Library of Munich, Germany.
    3. Ralf Hepp, 2005. "Health Expenditures Under the HIPC Debt Initiative," International Finance 0510005, University Library of Munich, Germany.
    4. Marchesi, Silvia & Missale, Alessandro, 2013. "Did High Debts Distort Loan and Grant Allocation to IDA Countries?," World Development, Elsevier, vol. 44(C), pages 44-62.
    5. Freytag, Andreas & Pehnelt, Gernot, 2009. "Debt Relief and Governance Quality in Developing Countries," World Development, Elsevier, vol. 37(1), pages 62-80, January.
    6. Canavire-Bacarreza, Gustavo & Nunnenkamp, Peter & Thiele, Rainer & Triveño, Luis, 2005. "Assessing the allocation of aid: Developmental concerns and the self-interest of donors," Kiel Working Papers 1253, Kiel Institute for the World Economy (IfW Kiel).
    7. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    8. Rainer Thiele & Peter Nunnenkamp & Axel Dreher, 2007. "Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 596-630, December.
    9. Mark McGillivray, 2006. "Aid Allocation and Fragile States," WIDER Working Paper Series DP2006-01, World Institute for Development Economic Research (UNU-WIDER).
    10. Marin Ferry & Marc Raffinot, 2019. "Curse or Blessing? Has the Impact of Debt Relief Lived up to Expectations? A Review of the Effects of the Multilateral Debt Relief Initiatives for Low-Income Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 55(9), pages 1867-1891, September.
    11. Nancy Birdsall & Stijn Claessens & Ishac Diwan, 2002. "Will HIPC Matter? The Debt Game and Donor Behaviour in Africa," WIDER Working Paper Series DP2002-50, World Institute for Development Economic Research (UNU-WIDER).
    12. Thiele, Rainer & Nunnenkamp, Peter & Dreher, Axel, 2006. "Sectoral aid priorities: Are donors really doing their best to achieve the millennium development goals?," Kiel Working Papers 1266, Kiel Institute for the World Economy (IfW Kiel).
    13. Powell, Robert & Bird, Graham, 2010. "Aid and Debt Relief in Africa: Have They Been Substitutes or Complements?," World Development, Elsevier, vol. 38(3), pages 219-227, March.
    14. Clist, Paul, 2011. "25Years of Aid Allocation Practice: Whither Selectivity?," World Development, Elsevier, vol. 39(10), pages 1724-1734.
    15. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, May.
    16. 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.
    17. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Wiley Blackwell, vol. 29(9), pages 1177-1201, September.
    18. Suzuki, Mao, 2020. "Profits before patients? Analyzing donors’ economic motives for foreign aid in the health sector," World Development, Elsevier, vol. 132(C).
    19. SAWADA Yasuyuki & YAMADA Hiroyuki & KUROSAKI Takashi, 2008. "Is Aid Allocation Consistent with Global Poverty Reduction?: A Cross-Donor Comparison," Discussion papers 08025, Research Institute of Economy, Trade and Industry (RIETI).
    20. Silvia Marchesi & Alessandro Missale, 2007. "How defensive were lending and aid to HIPC?," Working Papers 115, University of Milano-Bicocca, Department of Economics, revised 2007.

    More about this item

    Keywords

    HIPC debt initiative; foreign aid; selectivity; additionality;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpif:0510004. 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: . General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.