A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief

October 1, 2006

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper presents a theoretical model to explain how debt overhang is generated in low-income countries and discusses its implications for debt relief. The paper indicates that the extent of debt overhang, and the effectiveness of debt relief, would depend on a recipient country's initial economic conditions and level of total factor productivity.

Subject: Consumption, Debt burden, Debt relief, Loans, Total factor productivity

Keywords: debt ceiling, debtor country, interest rate, WP

Pages:
22
Volume:
2006
DOI:
https://doi.org/10.5089/9781451864847.001
Issue:
224
Series:
Working Paper No. 2006/224
Stock No:
WPIEA2006224
ISBN:
9781451864847
ISSN:
1018-5941

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