Does Lower Debt Buy Higher Growth? The Impact of Debt Relief Initiatives on Growth

Author/Editor:

Sandra Marcelino ; Ivetta Hakobyan

Publication Date:

December 18, 2014

Electronic Access:

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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:

In 1996, the IMF and the World Bank introduced the Heavily Indebted Poor Countries Initiative—a comprehensive debt relief program aimed at reducing the external debt burden of eligible countries to sustainable levels, provided they carry out strong programs of macroeconomic adjustment and structural reforms designed to promote growth and reduce poverty. Now that the HIPC Initiative is nearly completed, this paper investigates whether the initiative managed to spur growth, either directly or indirectly through investment. In contrast to earlier studies, we conclude that there is some evidence of positive effects of the HIPC Initiative on growth. Such evidence suggests that the HIPC Initiative and MDRI have helped HIPC-eligible countries to reach higher growth, but it remains unclear whether this is through higher investment or another channel. Also, the analysis illustrates that it is hard to disentangle pure debt-relief effects from other concurrent factors.

Series:

Working Paper No. 14/230

Subject:

English

Publication Date:

December 18, 2014

ISBN/ISSN:

9781498369671/1018-5941

Stock No:

WPIEA2014230

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

41

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