Debt Relief and Changing Governance Structures in Developing Countries

Andreas Freytag () and Gernot Pehnelt ()

No 31/2006, Jenaer Schriften zur Wirtschaftswissenschaft from Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät

Abstract: In this paper we empirically discuss the question whether or not debt relief in the past fifteen years has been economically rational. Analysing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s. Furthermore, even the actual debt burden of highly indebted poor countries had not been crucial for the decision whether or not debt forgiveness was granted. Rather, debt relief followed a strong path dependence: those countries whose debt had been forgiven in the first half of the 1990s have also been granted debt forgiveness in the second half of this decade. However, this allocation pattern changed at the beginning of the 21st century, where the path dependence was less strong and at least some dimensions of governance quality have been taken into account by donor countries.

Keywords: debt relief; HIPC; development; governance; institutional quality (search for similar items in EconPapers)
JEL-codes: O17 O19 O29 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-dev and nep-pol
Date: 2006-10-20
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Persistent link: http://EconPapers.repec.org/RePEc:jen:jenasw:2006-31

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