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Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process?

Joshua C. Hall, Serkan Karadas and Minh Tam T. Schlosky ()
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Joshua C. Hall, Serkan Karadas and Minh Tam T. Schlosky: West Virginia University, Sewanee: The University of the South, Sewanee: The University of the South

Authors registered in the RePEc Author Service: Joshua C. Hall

Journal of Economic Development, 2018, vol. 43, issue 3, 1-24

Abstract: The Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) were created by the IMF and World Bank to help low-income countries reduce their debt burden and to facilitate reaching the Millennium Development Goals. After entering the decision point of the HIPC Initiative stage, countries receive interim aid while following a strategic path to improve their macroeconomic stability via structural reforms. Many countries reached the completion point of the HIPC Initiative stage within a few years, receiving a substantial amount of debt relief. Other countries remained in the interim period for almost a decade. We explore the relationship between the level of corruption in HIPC countries and the length of time between the decision and the completion point. We use survival-time models to estimate the effect of various characteristics of the countries on the probability that each country will exit the interim period. The results show that countries with lower corruption and better rule of law complete the HIPC process faster.

Keywords: Debt Relief; HIPC; Moral Hazard; Survival Time Model; Foreign Aid (search for similar items in EconPapers)
JEL-codes: F34 F35 C41 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process? (2016) Downloads
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